Refer to the following summarized income statement and additional selected information for Huanca , Inc.: Income Statement
Question:
Refer to the following summarized income statement and additional selected information for
Huanca , Inc.:
Income Statement
Revenues $146,500
Cost of sales 55,500
Gross margin 91,000
Salary expense 56,835
Depreciation and amortization 33,305
Other expense 7,781
Net loss before tax (6,921)
Income tax expense 2,561
Net loss $ (9,482)
Other information:
Decrease in receivables $ 170
Decrease in inventories 643
Increase in prepaid expenses 664
Increase in accounts payable 2,282
Decrease in accrued liabilities 719
Increase in income taxes payable 1,861
Required:
1. Based on this information, compute cash flow from operating activities using the direct method. Assume that prepaid expenses and accrued liabilities relate to other expense.
2. What were the major reasons that Huanca’s was able to report a net loss but positive cash flow from operations? Why are the reasons for the difference between cash flows from operations and net income important to financial analysts?
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
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