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Changes in current operating assets and liabilities-indirect method Alpenrose Corporation’s comparative balance sheet for current assets and liabilities was as follows: Dec. 31, 2016 Dec. 31, 2015 Accounts receivable $27,000 $32,400 Inventory 18,000 15,480 Accounts payable 16,200 14,220 Dividends payable 49,500 53,100 Adjust net income of $207,000 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285743615
Chapter 16, Problem 16.3APE
Textbook Problem
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Changes in current operating assets and liabilities-indirect method

Alpenrose Corporation’s comparative balance sheet for current assets and liabilities was as follows:

Dec. 31, 2016 Dec. 31, 2015
Accounts receivable $27,000 $32,400
Inventory 18,000 15,480
Accounts payable 16,200 14,220
Dividends payable 49,500 53,100

Adjust net income of $207,000 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)
Add: Decrease in current assets
         Increase in current liability
         Depreciation expense and amortization expense
         Loss on sale of plant assets
Deduct: Increase in current assets
              Decrease in current liabilities
              Gain on sale of plant assets
Net cash provided from or used by operating activities

Table (1)

To Compute: Net cash flows from operating activities under indirect method.

Explanation of Solution

Working note:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details Amount ($) Effect on Operating Activities
Beginning Balance Ending Balance

Increase/

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Chapter 16 Solutions

Accounting (Text Only)
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