Chapter 6, Problem 27E

During the year, Hepworth Company earned a net income of 61,725. Beginning and ending balances for the year for selected accounts are as follows: There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows. Required: 1. Prepare a schedule of operating cash flows using the indirect method. 2. Suppose that all the data are used in Requirement 1 except that the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was 20,475. What is the ending balance of accounts payable? 3. CONCEPTUAL CONNECTION Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs 25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this years operating cash flows? If not, what would you suggest be done?