Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $142,200. Depreciation recorded on store equipment for the year amounted to $23,500. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:   End of Year Beginning of Year Cash $54,180   $49,850   Accounts receivable (net) 38,850   36,840   Merchandise inventory 53,040   56,080   Prepaid expenses 5,960   4,740   Accounts payable (merchandise creditors) 50,770   47,160   Wages payable 27,740   30,810   a.  Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.   Statement of Cash Flows (partial)   Cash flows from operating activities:       $   Adjustments to reconcile net income to net cash flow from operating activities:           Changes in current operating assets and liabilities:                                   Net cash flow from operating activities   $ b.  Cash flows from operating activities differs from net income because it does not use the   of accounting. For example revenues are recorded on the income statement when  .

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Chapter1: Financial Statements And Business Decisions
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Cash Flows from Operating Activities—Indirect Method

The net income reported on the income statement for the current year was $142,200. Depreciation recorded on store equipment for the year amounted to $23,500. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

  End of Year Beginning of Year
Cash $54,180   $49,850  
Accounts receivable (net) 38,850   36,840  
Merchandise inventory 53,040   56,080  
Prepaid expenses 5,960   4,740  
Accounts payable (merchandise creditors) 50,770   47,160  
Wages payable 27,740   30,810  

a.  Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

 
Statement of Cash Flows (partial)
 
Cash flows from operating activities:    
  $  
Adjustments to reconcile net income to net cash flow from operating activities:    
     
Changes in current operating assets and liabilities:    
     
     
     
     
     
Net cash flow from operating activities   $

b.  Cash flows from operating activities differs from net income because it does not use the   of accounting. For example revenues are recorded on the income statement when  .

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