Question

December 31 2017 2016 Accounts receivable $43,060 $34,630 Inventory 30,370 39,870 Prepaid rent 16,820 15,120 Totals $90,250 $89,620 Accounts payable $25,610 $19,430 Income taxes payable 5,970 10,500 Interest payable 14,710 12,440 Totals $46,290 $42,370 Net income for 2017 is $35,890. Depreciation expense is $18,040. Assume that all sales and all purchases are on account. Required: 1. Prepare the Operating Activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Answer 1

Net cash from operating activities is $57,220.

Step-by-step explanation:

Using the indirect method, the Operating Activities section of the statement of cash flows can be prepared as follows:

Statement of Cash Flows

(Operating Activities Section Only)

Details $

Net income 35,890

Adjustment to reconcile net income:

Depreciation expense 18,040

(Increase) decrease in current assets:

Increase in accounts receivable ($34,630 - $43,060) (8,430)

Decrease in inventory ($39,870 - $30,370) 9,500

Increase in prepaid rent ($15,120 - $16,820) (1,700)

Increase (decrease) in current liabilities:

Increase in accounts payable ($25,610 - $19,430) 6,180

Decrease in income taxes payable ($5,970 - $10,500) (4,530)

Increase in interest payable ($14,710 - $12,440) 2,270

Net cash from operating activities 57,220