Question

Portions of the financial statements for Peach Computer are provided below. PEACH COMPUTER Income Statement For the year ended December 31, 2018 Net sales $1,825,000 Expenses: Cost of goods sold $1,060,000 Operating expenses 570,000 Depreciation expense 51,000 Income tax expense 41,000 Total expenses 1,722,000 Net income $ 103,000 PEACH COMPUTER Selected Balance Sheet Data December 31 2018 2017 Increase (I) or Decrease (D) Cash $103,000 $85,500 $17,500 (I) Accounts receivable 45,100 49,500 4,400 (D) Inventory 76,000 55,500 20,500 (I) Prepaid rent 3,100 5,200 2,100 (D) Accounts payable 46,000 37,500 8,500 (I) Income tax payable 5,100 10,500 5,400 (D) Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method

Answer 1

PEACH COMPUTER

Cash flows from operating activities

For the year ended December 31, 2018

Cash flows from operating activities:

Net income $103,000

Adjustments to net income:

• Depreciation expense $51,000
• Decrease in accounts receivable $4,400
• Decrease in prepaid rent $2,100
• Increase in accounts payable $8,500
• Increase in inventory ($20,500)
• Decrease in income tax payable ($5,400) $40,100

Net cash flows provided by operating activities $143,100