Question

Cash Flows from Operating Activities—Indirect Method Selected data (in thousands) derived from the income statement and balance sheet of National Beverage Corp. for a recent year are as follows: Income statement data: Net income $49,311 Gain on disposal of property 1,188 Depreciation expense 11,580 Other items involving noncash expenses 1,383 Balance sheet data: Increase in accounts receivable 1,746 Decrease in inventory 990 Increase in prepaid expenses 605 Decrease in accounts payable 710 Decrease in accrued and other current liabilities 995 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method for National Beverage Corp. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Enter the amounts in thousands of dollars, as shown above. National Beverage Co. Cash Flows from Operating Activities (in thousands) Cash flows from operating activities:

Answer 1

To prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method for National Beverage Corp., we need to start with the net income and adjust for non-cash expenses, changes in working capital, and gains or losses on disposal of assets.

Step-by-step explanation:

To prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method for National Beverage Corp, we need to start with the net income and adjust for non-cash expenses, changes in working capital, and gains or losses on disposal of assets.

Starting with the net income of $49,311, we add back depreciation expense of $11,580, gain on disposal of property of $1,188, and other items involving noncash expenses of $1,383.

We then make adjustments for changes in working capital:

• Increase in accounts receivable of $1,746 - this represents a decrease in cash, so we subtract it
• Decrease in inventory of $990 - this represents an increase in cash, so we add it
• Increase in prepaid expenses of $605 - this represents a decrease in cash, so we subtract it
• Decrease in accounts payable of $710 - this represents a decrease in cash, so we subtract it
• Decrease in accrued and other current liabilities of $995 - this represents an increase in cash, so we add it

Adding up all these adjustments, we get a net increase in cash flows from operating activities of $64,018 (in thousands).