Item 2:

Entity B reported net income of $300,000 for the current year. Depreciation recorded on buildings and equipment amounted to $45,000 for the year. Balances of needed current asset and current liability accounts at the beginning and end of the year are as follows:

End of Year Beginning of Year Change

Accounts receivable 101,000 46,000 +55,000

Inventory 32,000 44,000

Prepaid insurance 4,000 0

Accounts payable 20,600 14,000

Taxes payable 6,500 10,000

Also, a gain on the sale of land of $5,000 was reported.

Instructions: Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

Net income 300,000

Adjustments to reconcile net income to cash flow from

operating activities: