Chapter 16 #4

Cash Flows from (Used for) Operating Activities The net income reported on the income statement for the current year was $119,900. Depreciation recorded on store equipment for the year amounted to $19,800. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End Beginning of Year of Year Cash $48,080 $43,750 Accounts receivable (net) 34,470 32,330 Merchandise inventory 47,070 49,220 Prepaid expenses 5,290 4,160 Accounts payable (merchandise creditors) 45.050 41,390 Wages payable 24,620 27,040 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) 119.900 Cash flows from operating activities: Net Income Adjustments to reconcile net income to net cash flows from used for) operating activities: Depreciation 19.300 119,000 19.800 Statement of Cash Flows (partial) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flows from (used for) operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable Decrease in merchandise inventory Increase in prepaid expenses Increase in accounts payable Decrease in wages payable Net cash flow from operating activities of accounting. For example b. Cash flows from operating activities differ from net income because it does not use the accrual basis revenues are recorded on the income statement when they are earned