Question

The following income statement and information about changes in noncash current assets and current liabilities are reported.

SONAD COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	1,515,000
Cost of goods sold					742,350
Gross profit					772,650
Operating expenses
Salaries expense	$	207,555
Depreciation expense		36,360
Rent expense		40,905
Amortization expenses–Patents		4,545
Utilities expense		16,665			306,030
					466,620
Gain on sale of equipment					6,060
Net income				$	472,680

Changes in current asset and current liability accounts for the year that relate to operations follow.

Accounts receivable	$	44,400		increase		Accounts payable	$	9,125		decrease
Inventory		25,325		increase		Salaries payable		4,050		decrease

Required:

Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

SONAD COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities;
Net Income		$472,680
Adjustments to reconcile net income to net cash provided by operating activities
Add : Depreciation Expenses	36,360
Add : Amortization expense—Patents	4,545
Less : Gain on sale of equipment	(6,060)
Changes in current operating assets and liabilities
Less :   Increase in accounts receivable	(44,400)
Less :   Increase in inventory	(25,325)
Less : Decrease in accounts payable	(9,125)
Less : Decrease in salaries payable	(4,050)	(48,055)
Net cash provided by operating activities		424,625