Hey Chegg, I need help with this question. For questions b, c, and d, my professor wants me to (1) give reasons for my choice and (2) give reasons why other choices are not appropriate. If you can help me with these questions, and explain in detail what my professor wants for question b, c, and d it would help me a lot. Thanks a lot.

Question

Reconciling and Computing Operating Cash Flows from Net Income Petroni Company reports the following selected results for its current calendar year.

Net income	$130,000
Depreciation expense	28,000
Accounts receivable increase	10,000
Accounts payable increase	6,000
Prepaid expenses decrease	3,000
Wages payable decrease	4,000

(a) Prepare the operating section only of Petroni Company's statement of cash flows for the year. Hint: Remember to use negative signs with answers when appropriate.

Petroni Company Statement of Cash Flows (operating section)
Operating activities
Net income		$Answer
Adjustments to reconcile net income to operating cash flow
Depreciation	Answer
Changes in operating assets and liabilities
Accounts receivable	Answer
Prepaid expense	Answer
Accounts payable	Answer
Wages payable	Answer	Answer
Net cash provided from operating activities		$Answer

In respect of questions that follow (1) give reasons for your choice (2) Give reasons why other choices are not appropriate

(b) Which of the following statements best describes the sign (positive or negative) on depreciation expense?

The sign on depreciation is positive because depreciation lowers the tax liability of the company. A decrease in tax liability generates an increase in net income since less tax is paid.

The sign on depreciation is positive because the computation of net income included a noncash depreciation expense. The noncash expense is removed by adding depreciation.

The sign on depreciation is negative because expenses are always subtracted from net income in cash flow statements to reflect the true amount of cash generated from operating activities.

The sign on depreciation is negative because cash is paid for equipment used in operations that are not yet reflected in the cost of goods sold. This increase in the cost of goods sold is subtracted from net income.

(c) Which of the following statements best describes the reason that accounts receivable is listed on the statement of cash flows?

An increase in accounts receivable means Sales have also increased. Sales are an increase in cash and contribute a positive cash flow. Therefore, an increase in accounts receivable is listed on the cash flow statement as a positive adjustment to net income.

An increase in accounts receivable means more cash has been received than has been reported in Sales. This surplus is an increase in cash and contributes a positive cash flow. Therefore, an increase in accounts receivable is listed on the cash flow statement as a negative adjustment to net income.

An increase in accounts receivable means less cash has been received than has been reported in Sales. This deficit is a decrease in cash and contributes a negative cash flow. Therefore, an increase in accounts receivable is listed on the cash flow statement as a negative adjustment to net income.

An increase in accounts receivable means Sales have also increased. Sales have increased, but cash has not yet been received. Therefore, an increase in accounts receivable is listed on the cash flow statement as a negative adjustment to net income.

(d) Which of the following statements best describes the reason that prepaid expense is listed on the statement of cash flows?

Since prepaid expense is an asset, a decrease in prepaid expense means assets have decreased causing cash to decrease. This contributes a negative cash flow. Therefore, a decrease in prepaid expense is listed on the cash flow statement as a negative adjustment to net income.

Since prepaid expense is a liability, a decrease in prepaid expense means liabilities have decreased causing cash to increase. This contributes a positive cash flow. Therefore, a decrease in prepaid expense is listed on the cash flow statement as a negative adjustment to net income.

Prepaid expense is an asset because Cash had been paid, but the expense had not yet been realized. A decrease in this asset means an expense has been recognized in the current period, decreasing net income, but not affecting cash. Therefore, decrease in prepaid expense is listed on the cash flow statement as a positive adjustment to net income.

Prepaid expense is a liability because expense has been realized, but Cash has not yet been paid. A decrease in liabilities leads to an increase in Cash and positive cash flow. Therefore, a decrease in prepaid expense is listed on the cash flow statement as a positive adjustment to net income.