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Cash flows from operating activities—indirect method The net income reported on the income statement for the current year was $185 : 000 depreciation recorded on equipment and a building amounted to $96,000 for the year. 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 $75,000 $86,150 Accounts receivable (ret) 84,550 90,000 Inventories 186,200 175,000 Prepaid expenses 3,600 4,500 Accounts payable (merchandise creditors) 91,500 110.000 Salaries payable 7,200 4,000 a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 16, Problem 16.6EX
Textbook Problem

Cash flows from operating activities—indirect method

The net income reported on the income statement for the current year was $185:000 depreciation recorded on equipment and a building amounted to $96,000 for the year. 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 $75,000 $86,150
Accounts receivable (ret) 84,550 90,000
Inventories 186,200 175,000
Prepaid expenses 3,600 4,500
Accounts payable (merchandise creditors) 91,500 110.000
Salaries payable 7,200 4,000

a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method.

b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

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Chapter 16 Solutions

Accounting
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