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Reporting Net Cash Flow from Operating Activities
The income statement for Granville Manufacturing Company is presented below.
The following balance sheet changes occurred during the year:
• Accounts receivable increased by $182,400.
• Inventory increased by $98,725.
• Prepaid expenses decreased by $64,100.
• Accounts payable increased by $43,850.
• Salaries payable increased by $54,900.
Required:
1. Prepare the net cash flows from operating activities using the indirect method.
2. CONCEPTUAL CONNECTION What are the causes of the major differences between net income and net cash flow from operating activities?
(a)
In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.
To compute:
Prepare the net cash flows from operating activities using the indirect method.
Format of operating activity
| Particular | Detail ($) | Amount ($) |
| Net income as per income statement | 108120 | |
| Depreciation expense | 246100 | |
| Bad debt | 51700 | 297800 |
| Operating profit before working capital change |
(b)
In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.
To discuss:
What are the causes of the major differences between net income and net cash flow from operating activities?
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