Question

The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syntric had no liability for insurance, deferred income taxes, or interest at any time during the period.

SYNTRIC COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands)
Sales				$	283.4
Cost of goods sold					(161.4	)
Gross margin					122.0
Salaries expense	$	32.6
Insurance expense		19.3
Depreciation expense		13.5
Depletion expense		5.8
Interest expense		12.9			(84.1	)
Gains and losses:
Gain on sale of equipment					20.5
Loss on sale of land					(7.6	)
Income before tax					50.8
Income tax expense					(25.4	)
Net income				$	25.4
Cash Flows from Operating Activities:
Cash received from customers				$	232.0
Cash paid to suppliers					(148.0	)
Cash paid to employees					(27.0	)
Cash paid for interest					(10.7	)
Cash paid for insurance					(14.6	)
Cash paid for income tax					(13.0	)
Net cash flows from operating activities				$	18.7

Required:
Prepare a schedule to reconcile net income to net cash flows from operating activities. (Enter your answers in thousands rounded to 1 decimal place (i.e., 5,500 should be entered as 5.5). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

SYNTRIC COMPANY Statement of cash flows (partial) For the Year Ended December 31, 2021 ($ in thousands)
Net income		25.4
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense		13.5
Depletion expense		5.8
Gain on sale of equipment		- 20.5
Loss on sale of land		7.6
Changes in current assets and current liabilities
Increase in accounts receivables		- 51.4
Increase in accounts payable		13.4
Increase in income tax payable		12.4
Increase in salaries payable		5.6
Increase in insurance payable		4.7
Increase in interest payable		2.2
Net cash flows from operating activities			$18.7

i) Increase in accounts receivables = Sales - Cash received from customers

= 283.4 - 232

= $51.4

ii) Increase in accounts payable = Cost of goods sold - Cash paid to suppliers

= 161.4 - 148

= $13.4

iii) Increase in income tax payable = Income tax expense - Cash paid for income tax

= 25.4 - 13

= $12.4

iv) Increase in salaries payable = Salaries expense - Cash paid to employees

= 32.6 - 27

= $5.6

v) Increase in insurance payable = Insurance expense - Cash paid for insurance

= 19.3 - 14.6

= $4.7

vi) Increase in interest payable = Interest expense - Cash paid for interest

= 12.9 - 10.7

= $2.2