Question

Net Cash Flow From Operating Activities

The following are accounting items taken from Tyrone Shoelaces Company's records for 2016:

Net income, $22,700

Payment for purchase of land, $4,000

Payment for retirement of bonds, $6,000

Depreciation expense, $7,800

Receipt from issuance of common stock, $7,000

Patent amortization expense, $3,700

Increase in accounts receivable, $4,300

Payment of dividends, $5,000

Decrease in accounts payable, $2,700

Required:

Prepare the net cash flow from operating activities section of Tyrone's 2016 statement of cash flows using the indirect method. Use a minus sign for any negative amounts.

Answer 1

• All working forms part of the answer

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

• Requirement: Statement of Cash Flows – Partial

Cash Flows from Operating Activities
Net Income		$           22,700.00
Adjustments to reconcile Net Income to
net cash provided by Operating Activities
Depreciation Expense	$              7,800.00
Patent Amortisation expense	$              3,700.00
Increase in Accounts receivables	$            (4,300.00)
Decrease in Accounts payable	$            (2,700.00)	$             4,500.00
Net Cash flow from Operating Activities		$           27,200.00 = ANSWER

• Note: Following are not included above because:

Purchase of Land	Investing activities
Retirement of Bonds	Financing Activities
Issuance of Stock	Financing Activities
Dividends paid	Financing Activities