Question

The income statement disclosed the following items for 2016:

Depreciation expense $ 57,600
Gain on disposal of equipment 33,600
Net income 508,000
Balances of the current assets and current liability accounts changed between December 31, 2015, and December 31, 2016, as follows:

Increase (Decrease)

Accounts receivable $8,960
Inventory (5,120)
Prepaid insurance (1,920)
Accounts payable (6,080)
Income taxes payable 1,410
Dividends payable 2,200
Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Answer 1

$527,610

Step-by-step explanation:

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

Cash flow from Operating activities

Net income $508,000

Adjustment made:

Add : Depreciation expense $57,600

Less: Gain on disposal of equipment -$33,600

Less: Increase in accounts receivable -$8,960

Add: Decrease in inventory $5,120

Less: Decrease in accounts payable -$6,080

Add: Increase in income tax payable $1,410

Add: Increase in dividend payable $2,200

Add: Increase in prepaid insurance $1,920

Net Cash flow from Operating activities $527,610