Question

Selected balance sheet information and the income statement for Fountainhead Corporation for the current year are presented below.

Selected Balance Sheet Accounts
	Prior Year			Current Year
Accounts Receivable	$	26,200		$	18,000
Merchandise Inventory		36,000			39,600
Prepaid Rent		2,600			0
Accounts Payable		20,600			26,800
Salaries and Wages Payable		5,200			7,800

Income Statement
Sales Revenue	$	540,000
Expenses:
Cost of Goods Sold		308,000
Depreciation Expense		36,000
Salaries Expense		54,000
Rent Expense		21,600
Insurance Expense		21,600
Interest Expense		19,800
Utilities Expense		18,000
Net Income	$	61,000

Required:  
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. (Enter any deductions and cash outflows as a negative value.)

References

Answer 1

• Cash Flow Statement – Partial, as asked

Indirect Method

Cash Flows from Operating Activities
Net Income		$          61,000.00
Adjustments to reconcile Net Income to
Net Cash provided by Operating activities
Depreciation Expense	$                  36,000.00
Decrease in Accounts receivables	$                    8,200.00
Increase in Inventory	$                  (3,600.00)
Decrease in prepaid Rent	$                    2,600.00
Increase in Accounts Payable	$                    6,200.00
Increase in salaries & wages payable	$                    2,600.00	$          52,000.00
Net Cash flows - provided by Operating Activities		$        113,000.00

• Working

No.	Conceptual Notes
1	Cash Flow Statement reflects the Cash Inflows and Outflows during a period of time.
2	Effects of Non - Cash Transaction are adjusted from Net Income.
3	Depreciation Expense, Amortisation expenses are Added back to Net Income in Cash Flow Statement.
4	Decrease in Current Assets OR Increase in Current Liabilities are ADDED to Net Income
5	Increase in Current Assets OR Decrease in Current Liabilities are DEDUCTED from Net Income