Answered: Curwen Inc. reported net cash flow from…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 15E

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Question

termining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $216,400 on its statement of cash flows for the year ended December 31. The following information was reported in the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable	$4,200
Decrease in inventories	10,400
Depreciation	16,000
Gain on sale of investments	7,200
Increase in accounts payable	2,900
Increase in prepaid expenses	1,800
Increase in accounts receivable	7,800

a. Determine the net income reported by Curwen Inc. for the year ended December 31.
$fill in the blank 1

b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference?

Because depreciation expense which has no effect on cash flows from operating activities.
Changes in current operating assets and liabilities that are added or deducted.
Changes in fixed assets and liabilities that are added or deducted.
Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

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