Prothers 583 PRACTICE PROBLEMS 1. The income statement for the December Bomenyertains the following condensed information 2017. for Kesik Manc ing KOSINSKI MANUFACTURING COMPANY Income Statement For the Year Ended December 31, 2017 56,583.000 Operating expenses (excluding depreciation) Depreciation so $4,920,000 5,000,000 353.000 $430,000 Net Income Included in operating expenses is a $24,000 loss resulting from the sale of equipment for $270,000 cash. Equipement was purchased at a cost of $750,000. The following balances are reported on Kosinski's comparative balance sheets at December 31. KOSINSKI MANUFACTURING COMPANY Comparative Balance Sheets (partial) Cash Accounts receivable Inventory Accounts payable 2017 $672.000 775.000 834,000 521,000 2016 $130.000 610,000 867.000 501,000 Income tax expense of $353,000 represents the amount paid in 2017. Dividends declared and paid in 2017 totaled $200,000. Instructions Prepare the statement of cash flows using the indirect method. Solution KOSINSKI MANUFACTURING COMPANY Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2017 $ 430,000 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on disposal of equipment Increase in accounts receivable Decrease in inventory Increase in accounts payable Net cash provided by operating activities $ 880,000 24,000 (165,000) 33,000 20,000 792,000 1,222,000