Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $124,500. Depreciation recorded on store equipment for the year amounted to $20,500. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $47,430 $43,640 Accounts receivable (net) 34,010 32,250 Inventories 46,430 49,100 Prepaid expenses 5,220 4,150 Accounts payable (merchandise creditors) 44,440 41,280 Wages payable 24,280 26,970 a. Prepare the "Cash flows from operating activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable 100000 0 0 Decrease in inventories V Increase in prepaid expenses Increase in accounts payable Decrease in wages payable Net cash flow from operating activities Foodback Check My Work Compute the increases and decreases in the current asset/liability accounts over the period. Determine what affect these changes would have on cash. b. Cash flows from operating activities differs from net income because it does not use the accrual basis of accounting. For example revenues are recorded on the income statement when they are earnedCash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $311,600. Depreciation recorded on equipment and a building amounted to $93,200 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $81,330 $86,210 Accounts receivable (net) 103,130 106,380 Inventories 203,330 183,280 Prepaid expenses 11,300 12,160 Accounts payable (merchandise creditors) 90,850 96,210 Salaries payable 13,090 11,980 a. Prepare the "Cash Flows from Operating Activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income 0 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Decrease in accounts receivable Increase in inventories V Decrease in prepaid expenses Decrease in accounts payable Increase in salaries payable Net cash flow from operating activities Foodback Check My Work Compute the increases and decreases in the current asset/liability accounts over the period. What affect would these changes have on cash? b. If the direct method had been used, would the net cash flow from operating activities have been the same