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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: 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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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 16, Problem 6E
Textbook Problem
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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:

Chapter 16, Problem 6E, The net income reported on the income statement for the current year was 185,000. Depreciation , example  1

  1.        a.            Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method.
  2.       b.            Chapter 16, Problem 6E, The net income reported on the income statement for the current year was 185,000. Depreciation , example  2 If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

a.

To determine

Prepare cash flows from operating activities sections of the statement of cash flows using 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
DetailsAmount ($)Effect on Operating Activities
Beginning BalanceEnding Balance

Increase/

b.

To determine

Explain if direct method used would, the net cash flow from operating activities will be same.

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Chapter 16 Solutions

Financial Accounting
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