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Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 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$ 75,900 $ 86,150

Accounts receivable (net)84,550 90,000

Inventories 186,200 175,000

Prepaid expenses 3,600 4,500

Accounts payable (merchandise creditors)91,500 110,000

Salaries payable 7,200 4,000

a.Prepare the Cash Flows from Operating Activities section of thestatement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)

Cash flows from operating activities:Net income

$Adjustments to reconcile net income to net cash flow from operating activities:Depreciation

Changes in current operating assets and liabilities:Decrease in accounts receivable

Increase in inventories

Decrease in prepaid expenses

Decrease in accounts payable

Increase in salaries payable

Net cash flow from operating activities$eBookShow Me HowCalculator