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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

Determining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flows from operating activities of $148,200 on its statement of cash flows for a recent year ended December 31. The following information was reported in the Cash flows from (used for) operating activities section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable	$3,000
Decrease in inventories	7,400
Depreciation	11,400
Gain on sale of investments	5,100
Increase in accounts payable	2,100
Increase in prepaid expenses	1,300
Increase in accounts receivable	5,600

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 differed from cash flows from operations because of the following:

Depreciation expense, which has no effect on net cash flows from operating activities.
Gain on the sale of investments is reported in investing activities section of the cash flow statement.
Changes in current operating assets and liabilities that are added or deducted, depending on their effect on cash flow but not in the income statement.
Operating expenses are deducted from income but are added in the cash flow statement.
Dividends are deducted from the investing activities in cash flow statement but are a charge against income in the income statement.

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