Question

Parra Company completed its income statement and comparative balance sheet for the current year and provided the following information :

Income Statement
Service revenue $ 67,600
Expenses
Salaries $40,100
Depreciation 6,700
Utilities 6,400
Loss on sale of equipment 800 54,000
Net income $ 13,600

Partial Balance Sheet Current Year Prior Year
Accounts receivable $ 12,900 $ 26,000
Salaries payable 19,100 11,600
Other accrued liabilities 6,300 9.700
Land 50,600 58,900

Required:
Present the operating activities section of the statement of cash flows for Parra Company using the indirect method. (List cash outflows as negative amounts.)

Answer 1

Parra Company's operating activities section of the statement of cash flows using the indirect method includes adjustments for non-cash items, changes in working capital, and results in a net cash provided by operating activities of $45,100.

To present the operating activities section of the statement of cash flows using the indirect method, we need to reconcile net income to net cash provided by operating activities. Here's the calculation:

1. Net Income:

`\[ \text{Net Income} = \$13,600 \]`

2. Adjustments for Non-Cash Items:

- Depreciation: Add back depreciation as it is a non-cash expense.

+\$6,700

- Loss on Sale of Equipment: Add back the loss on the sale of equipment as it is a non-cash item.

+\$800

3. Changes in Working Capital:

- Decrease in Accounts Receivable: Add the decrease in accounts receivable.

+\$13,100

- Increase in Salaries Payable: Add the increase in salaries payable.

+\$7,500

- Decrease in Other Accrued Liabilities: Add the decrease in other accrued liabilities.

+\$3,400

4. Net Cash Provided by Operating Activities:

`\[ \text{Net Cash Provided by Operating Activities} = \$13,600 + \$6,700 + \$800 + \$13,100 + \$7,500 + \$3,400 \]\[ \text{Net Cash Provided by Operating Activities} = \$45,100 \]`

Therefore, the operating activities section of the statement of cash flows for Parra Company using the indirect method is as follows:

(attached)