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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Amelia’s Bookstore reported net income of $62,000 for the current year. The following information is also available for the year: $5,000 depreciation expense, $5,500 increase in inventory, $2,000 decrease in accounts receivable, and $1,250 decrease in accounts payable. Using the indirect method, prepare the operating activities section of the statement of cash flows for Amelia’s for the current year.

To determine

Prepare the operating activities section of statement of cash flows under indirect method for Bookstore A for the current year.

Explanation

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

Indirect method: Under indirect method, net income is reported first, then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.

Operating activities: Operating activities include cash inflows and outflows from business operations.

Prepare the operating activities section of statement of cash flows under indirect method for Bookstore A for the current year:

Bookstore A
Statement of Cash Flows
For the year ended December 31

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