During the year, Hepworth Company earned a net income of $62,425 Beginning and ending balances for the year for selected accounts are as follows Account Beginning Ending Cash $102,000 $121,200 Accounts receivable 68,100 99,350 Inventory 36,500 52,100 Prepaid expenses 27,400 29,600 Accumulated depreciation 81,400 91,000 Accounts payable 45,400 54,525 Wages payable 27,300 14,400 There were no financing or investing activities for the year The above balances reflect all of the adjustments needed to adjust net income to operating cash flows Required 1 Prepare a schedule of operating cash flows using the indirect method 2 Suppose that all the data are the same as Requirement 1 except the ending accounts payable and cash balances are not known Assume also that you know that the operating cash flow for the year was $20,975 What is the ending balance of accounts payable 3 Conceptual Connection Hepworth has an opportunity to buy some equipment that will significantly increase productivity The equipment costs $25,000 Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this years operating cash flows

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 24, 2024

During the year, Hepworth Company earned a net income of $62,425. Beginning and ending balances for the year for selected accounts are as follows: Account

During the year, Hepworth Company earned a net income of $62,425. Beginning and ending balances for the year for selected accounts are as follows: Account Beginning Ending Cash $102,000 $121,200 Accounts receivable 68,100 99,350 Inventory 36,500 52,100 Prepaid expenses 27,400 29,600 Accumulated depreciation 81,400 91,000 Accounts payable 45,400 54,525 Wages payable 27,300 14,400

There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows.

Required:

1.	Prepare a schedule of operating cash flows using the indirect method.
2.	Suppose that all the data are the same as Requirement 1 except the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,975. What is the ending balance of accounts payable?
3.	Conceptual Connection: Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this years operating cash flows?