Final answer:
To calculate the cash flows from operating activities using the indirect method, adjustments are made to net income by adding back non-cash expenses and accounting for changes in working capital. The resulting cash flow from operating activities for this question is $261,000.
Step-by-step explanation:
To calculate the cash flow from operating activities using the indirect method, we start with the net income and adjust for non-cash expenses and changes in working capital.
Start with the net income: $250,000.
Add back non-cash expenses:
Depreciation: $40,000
Amortization of patents: $9,000
Adjust for changes in working capital:
Decrease in cash: $60,000 - $50,000 = $10,000 (deducted)
Increase in accounts receivable: $112,000 - $108,000 = $4,000 (deducted)
Increase in inventories: $105,000 - $93,000 = $12,000 (deducted)
Decrease in prepaid expenses: $6,500 - $4,500 = $2,000 (added)
Decrease in accounts payable: $89,000 - $75,000 = $14,000 (deducted)
Now we combine all the adjustments with the net income:
$250,000 + $40,000 + $9,000 - $10,000 - $4,000 - $12,000 + $2,000 - $14,000 = $261,000.
The amount of cash flows from operating activities reported on the statement of cash flows is $261,000.