30,440 2016 $35,100 40,300 2017 Accounts receivable $43,420 Inventory Prepaid rent Totals Accounts payable Income taxes payable Interest payable Totals 17,210 14,900 $91,070 $90,300 $25,780 $18,780 5,960 10,470 14,850 11,620 $46,590 $40,870 Net income for 2017 is $43,240. Depreciation expense is $20,670. Assume that all sales and all purchases are on account. Required: 1. Prepare the Operating Activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash. Suffolk Company Partial Statement of Cash Flows For the Year Ended December 31, 2017 Cash Provided by Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Decrease in inventory Increase in prepaid rent Increase in accounts payable Decrease in income taxes payable Increase in interest payable Net cash inflow from operating activities Feedback Check My Work The indirect method involves reporting net cash flow from operating activities and is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments and all accruals of future operating cash receipts and payments. Some items reported on the income statement do not use cash, so they need to be adjusted for on the cash flow statement. 2. Net cash inflow from operating activities is decrease in inventory and the primary reason why it is higher than net income is depreciation . Other reasons for the higher amount of net cash inflow from operating activities are increase in accounts payable and