Canada Wide Transportation (CWT) began 2020 with accounts receivable, inventory, and prepaid expenses totalling \(\$ 65,000\). At the end of the year, CWT had a total of \(\$ 78,000\) for these current assets. At the beginning of 2020, CWT owed current liabilities of \(\$ 42,000\), and at year-end, current liabilities totalled \(\$ 40,000\).

Net income for the year was \(\$ 80,000\). Included in net income were a \(\$ 4,000\) gain on the sale of land and depreciation expense of \(\$ 9,000\).

Show how CWT should report cash flows from operating activities for 2020. CWT uses the indirect method. Use Exhibit 9-6 as a guide.

Transcribed Image Text:

EXHIBIT 9-6 Statement of Cash Flows-Operating Activities by the Indirect Method 1 A Bradshaw Corporation Statement of Cash Flows B C D For the Year Ended December 31, 2020 2 (in thousands) 3 Cash flows from operating activities: 4 5 6 A 7 B 8 9 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Gain on sale of property, plant, and equipment Increase in accounts receivable Increase in interest receivable Decrease in inventory Increase in prepaid expenses Increase in accounts payable $ 41 $ 18 .(8) (13) (2) 3 10 11 12 (1) 12 34 13 Decrease in salary and wages payable (2) 14 Decrease in accrued liabilities (2) 27 15 16 56 Net cash provided by operating activities $ 68