Question

Reindeer Company reports net income of $390,000 for the year ended December 31, 2019. It also reports $70,000 depreciation expense and a $10,000 gain on the sale of machinery. Its comparative balance sheets reveal a $30,000 increase in accounts receivable, $16,000 increase in accounts payable, $8,000 decrease in prepaid expenses, and $12,000 decrease in wages payable.

Required:

Prepare only the operating activities section of the statement of cash flows for 2019 using the indirect method.

Answer 1

Answer)

Statement of Cash flow from operating activities (Indirect Method)

Cash flow from operating Activities	Amount (In $)
Net Income	390,000
Add: Depreciation Expense	70,000
Less: Gain on sale of machinery	10,000
Add: (Decrease) in Current Assets/Increase in Current Liabilities
Increase in Accounts Payable	16,000
Decrease in Prepaid expenses	8,000
Less: Increase in Current Assets/ Decrease in Current Liabilities
Less: Increase in accounts receivable	30,000
Less: Decrease in wages payable	12,000
Net Cash flow from operating Activities	432,000