Question

Spectacular Corporation began the year with accounts​receivable, inventory, and prepaid expenses totaling $67,000. At the end of the​ year,

Spectacular had a total of $78,000

for these current assets. At the beginning of the​ year, it owed current liabilities of $44,000,and at​ year-end, current liabilities totaled $43,000. Net income for the year was $82,000. Included in net income was a $3,000 gain on the sale of land and depreciation expense of $10,000.

Show how Spectacular should report cash flows from operating activities for the year. The company uses the indirect method

Answer 1

Step-by-step explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $82,000

Adjustment made:

Add : Depreciation expense $10,000

Less : Gain on the sale of land ($3,000)

Less: Increase in current assets -$11,000 ($78,000 - $67,000)

Less: Decrease in current liabilities -$1,000 ($43,000 - $44,000)

Total of Adjustments -$5,000

Net Cash flow from Operating activities $77,000