Cash Flows from Operating ActivitiesIndirect Method The net income reported on the income statement for the…

Cash Flows from Operating ActivitiesIndirect Method
The net income reported on the income statement for the current
year was $116,900. Depreciation recorded on store equipment for the
year amounted to $19,300. 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
$45,240

$41,170

Accounts receivable (net)
32,440

30,420

Merchandise inventory
44,290

46,320

Prepaid expenses
4,980

3,910

Accounts payable (merchandise creditors)
42,390

38,950

Wages payable
23,160

25,440

a. Prepare the Cash Flows from Operating
Activities section of the statement 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:

Increase in accounts
receivable

Decrease in merchandise
inventory

Increase in prepaid
expenses

Increase in accounts
payable

Decrease in wages
payable

Net cash flow from operating
activities

$

b. Cash flows from operating activities differs
from net income because it does not use the of accounting. For
example revenues are recorded on the income statement when .

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