Question

Exercise 12-04 Sosa Company reported net income of $190,000 for 2022. Sosa Company also reported depreciation expense of $35,000 and a loss of $5,000 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 increase in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2022. Use the indirect method.

Answer 1

Operating activities of cash flow: $228,000

Step-by-step explanation:

The operating activities section of the Sosa company cash flow can be determined using the following way.

Net income as reported by Sosa company $190,000

Add:depreciation expense $35,000

Add: a loss on the disposal of asset $5,000

Less:increase in accounts receivable ($15,000)

Add:increase in accounts payable $17,000

Less: increase in prepaid expenses ($4,000)

Operating activities of cash flow: $228,000