Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $152,200. Depreciation recorded on store equipment for the year amounted to $25,100. 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	$58,440		$53,760
Accounts receivable (net)	41,900		39,730
Inventories	57,210		60,480
Prepaid expenses	6,430		5,110
Accounts payable (merchandise creditors)	54,760		50,860
Wages payable	29,920		33,220

Question Content Area

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.

Cash flows from operating activities:
Decrease in prepaid expenses Depreciation Increase in inventories Net income	$_____
Adjustments to reconcile net income to net cash flow from operating activities:
Decrease in accounts payable Decrease in accounts receivable Depreciation Increase in wages payable	______
Changes in current operating assets and liabilities:
Depreciation Increase in accounts receivable Increase in inventories Increase in wages payable	______
Decrease in accounts receivable Decrease in inventories Decrease in prepaid expenses Increase in inventories	______
Decrease in accounts receivable Increase in inventories Increase in prepaid expenses Increase in wages payable	______
Decrease in accounts payable Depreciation Increase in accounts payable Increase in wages payable	______
Decrease in accounts receivable Decrease in prepaid expenses Decrease in wages payable Increase in wages payable	______
Net cash flow from operating activities		$______

Question Content Area

b. Cash flows from operating activities differs from net income because it does not use the (accrual basis, cash basis) of accounting. For example revenues are recorded on the income statement when (they are earned, cash is received)

.