Question

The current section of Yawn Ltd's statement of financial position at 30 June 2016 is presented below.
		2016		2015
		$		$
Current assets
Cash		105,300		97,200
Accounts receivable		121,200		91,500
Inventory		163,700		190,700
Prepaid expenses		27,300		22,400
Total current assets		417,500		401,800
Current liabilities
Accounts payable		83,100		89,900
Accrued expenses payable		14,600		4,900
Total current liabilities		97,700		94,800
Other information	1.	Profit for the year ended 30 June 2016 was $148,600.
	2.	Depreciation expense was $19,100.
Required
Prepare the net cash provided by the operating activities section of Yawn's statement of cash flows
for the year ending 30 June 2016, using the indirect method.

Answer 1

Notes:

Depreciation expense on the income statement ,being a non-cash item ,does not involve cash ouflow.Net income was reduced by a non-cash expense.Therefore, to obtain cash flows from operating activities,it is added back to net income on the statement of cash flows.

Decrease in non-cash current assets are added to net income to arrive at cash flows from operating activities and Increase in non-cash current assets are subtracted from net income to arrive at cash flows from operating activities.

Increase in current liabilities are added to net income to arrive at cash flows from operating activities.Decrease in current liabilities are subtracted from net income to arrive at cash flows from operating activities.