Question
Cash Flows from (Used for) Operating Activities The net income reported on the income statement for the current year was $138,500. Depreciation recorded on store
Cash Flows from (Used for) Operating Activities
The net income reported on the income statement for the current year was $138,500. Depreciation recorded on store equipment for the year amounted to $22,900. 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 | $54,710 | $49,790 | ||
Accounts receivable (net) | 39,230 | 36,790 | ||
Merchandise inventory | 53,560 | 56,010 | ||
Prepaid expenses | 6,020 | 4,730 | ||
Accounts payable (merchandise creditors) | 51,260 | 47,100 | ||
Wages payable | 28,010 | 30,770 |
a. Prepare the Cash Flows from (used for) 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: | ||
CashDecrease in accounts receivableDepreciationIncrease in wages payableNet incomeNet income | $Net income | |
Adjustments to reconcile net income to net cash flows from (used for) operating activities: | ||
CashDecrease in accounts payableDecrease in accounts receivableDepreciationIncrease in wages payableDepreciation | Depreciation | |
Changes in current operating assets and liabilities: | ||
CashDepreciationIncrease in accounts receivableIncrease in inventoriesIncrease in wages payable | - Select - | |
CashDecrease in accounts receivableDecrease in merchandise inventoryIncrease in inventoriesIncrease in prepaid expenses | - Select - | |
CashDecrease in accounts receivableIncrease in prepaid expensesIncrease in inventoriesIncrease in wages payable | - Select - | |
CashDecrease in accounts payableDepreciationIncrease in accounts payableIncrease in wages payable | - Select - | |
CashDecrease in accounts receivableDecrease in wages payableIncrease in prepaid expensesIncrease in wages payable | - Select - | |
Net cash flow from operating activities | $fill in the blank 28b140f7a009ff5_15 |
b. Cash flows from operating activities differ from net income because it does not use the
accrual basiscash basis
of accounting. For example revenues are recorded on the income statement when
cash is receivedthey are earned
.
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