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Cash flows from (used for) operating activities-indirect method The net income reported on the income statement for the current year was $267,400. Depreciation recorded on
Cash flows from (used for) operating activities-indirect method The net income reported on the income statement for the current year was $267,400. Depreciation recorded on equipment and a building amounted to $80,000 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 Accounts receivable (net) $74,340 $78,800 94,260 97,240 Inventories 185,850 167,530 Prepaid expenses 10,330 11,110 Accounts payable (merchandise creditors) Salaries payable 83,040 11,970 87,940 10,950 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. Statement of Cash Flows (partial) Line Item Description Amount Amount Cash flows from (used for) operating activities: Net income 267,400 Adjustments to reconcile net income to net cash flows from (used for) operating activities: Depreciation 80,000 Changes in current operating assets and liabilities: Decrease in accounts receivable 2,980 Line Item Description Amount Amount Cash flows from (used for) operating activities: Net income 267,400 Adjustments to reconcile net income to net cash flows from (used for) operating activities: Depreciation 80,000 Changes in current operating assets and liabilities: Decrease in accounts receivable 2,980 Increase in inventories 18,320 X Decrease in prepaid expenses Decrease in accounts payable Increase in salaries payable Net cash flows from operating activities Feedback 780 4,900 X 1,029 X 328,960 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 flows from operating activities have been the same? Yes
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