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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Reporting Net Cash Flow from Operating Activities

The income statement for Granville Manufacturing Company is presented below.

Chapter 11, Problem 53PSA, Reporting Net Cash Flow from Operating Activities The income statement for Granville Manufacturing

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?

To determine

(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.

Explanation

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
To determine

(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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