Cash Flows from Operations (Indirect Method)

Gardner Enterprises reported a net loss of $40,000 for the year just ended. Relevant data for the company follow.

Required:
1. Using the indirect method, determine the net cash flows provided by (used in) operating activities for Gardner Enterprises.
2. Interpretive Question: Explain how Gardner Enterprises can pay cash dividends during a year when it reports a net loss.

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Cash and cash equivalents Accounts receivable (net) Inventory.. Prepaid expenses Accounts payable Accrued liabilities Dividends payable. Beginning of Year $ 50,000 80,000 123,000 End of Year $ 20,000 65,000 130,000 7,500 4,500 55,000 60,000 10,000 4,000 25,000 35,000 Depreciation for the year, $43,000 Dividends declared, $35,000