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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Swasey Company provided the following partial comparative balance sheets and the income statement for 20X2.

Chapter 14, Problem 19BEA, Swasey Company provided the following partial comparative balance sheets and the income statement

Required:

Compute operating cash flows using the indirect method.

To determine

Calculate the operating cash flows with the use of indirect method.

Explanation

Cash Flows from Operating Activities:

This category of a cash flow statement shows the operational and profit generating activities in a firm. The operating cash flows increase or decrease the current assets and current liabilities of a firm.

The calculation of operating cash flows using indirect method is shown in table below:

S Company
Cash Flow Statement
Operating Cash Flows:
ParticularsAmount ($)
Net income1,800,000
Add/ Less: 
    Decrease in accounts receivable1335,000
    Decrease in wages payable2(370,000)
    Increase in inventories3(40,000)
    Depreciation expense540,000
    Gain on sale of equipment(200,000)
        Net cash from operating activities2,065,000

Table (1)

Therefore, net cash flow from operating activities is $2,065,000.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($1,165,000$1,500,000)=$335,000

2

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