Bart Sampson, the owner-president of Computer Services Company, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation.

Instructions

Write him a brief memo explaining the form and content of the statement of cash flows as shown in Illustration 13-13.

Illustration 13-13

Transcribed Image Text:

Computer Services Company Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2014 Cash flows from operating activities $ 145,000 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on disposal of plant assets Decrease in accounts receivable 9,000 3,000 10,000 (5,000) (4,000) 16,000 (2,000) Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in income taxes payable 27,000 Net cash provided by operating activities 172,000 Cash flows from investing activities Purchase of building Purchase of equipment Disposal of plant assets (120,000) (25,000) 4,000 Net cash used by investing activities (141,000)