Question

Case A Case B

Year 2 Year 1 Year 2 Year 1
Sales Revenue $ 10,700 $ 7,500 $ 20,700 $ 16,500
Cost of Goods Sold 5,730 4,300 11,730 9,730
Gross Profit 4,970 3,200 8,970 6,770
Depreciation Expense 1,100 1,100 1,350 1,350
Salaries and Wages Expense 2,200 1,700 4,700 4,700
Net Income 1,670 400 2,920 720
Accounts Receivable 285 370 720 585
Inventory 735 470 715 770
Accounts Payable 770 685 830 870
Salaries and Wages Payable 985 1,170 295 380
Show the operating activities section of the statement of cash flows for year 2 using the indirect method.(Amounts to be deducted should be indicated with a minus sign.)

Case A Case B
adjustments to reconcile Net Income to Net cash provided by operating activities $____
Change in assests and liabilities $_____

Answer 1

The operating activities section of the statement of cash flows for year 2 using the indirect method is $4,055.

Step-by-step explanation:

The statement of cash flows is a financial statement that shows the sources and uses of cash during a given period. It categorizes cash flows into three sections: operating activities, investing activities, and financing activities. In this case, we are asked to show the operating activities section using the indirect method.

To calculate the operating activities section, we start with the net income and make adjustments to reconcile it to net cash provided by operating activities. This involves adding back non-cash expenses like depreciation and subtracting changes in current assets and liabilities.

Step by step, the operating activities section for year 2 using the indirect method is as follows:

Start with net income from the income statement: $2,920

Add back depreciation expense: $1,350

Subtract the increase in accounts receivable: $720 - $285 = $435

Add the decrease in inventory: $715 - $735 = -$20

Add the increase in accounts payable: $830 - $770 = $60

Subtract the decrease in salaries and wages payable: $295 - $985 = -$690

The total adjustments to reconcile net income to net cash provided by operating activities is $2,200. Therefore, the operating activities section of the statement of cash flows for year 2 is $2,920 + $1,350 + $435 - $20 + $60 - $690 = $4,055.