Question

Chew Corporation prepares its statement of cash flows using the indirect method of reporting operating activities. Net income for the 2021 fiscal year was $1,250,000. Depreciation expense of $140,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash:

Increase in accounts receivable
 ...........$152,000
Decrease in inventory .............................108,000
Decrease prepaid expenses .....................62,000
Decrease in salaries payable ...................30,000
Increase in income taxes payable ...........44,000

 

Required:
Calculate cash flows from operating activities for 2021.

Answer 1

Cash flows from operating activities:

          Net income                                                             $1,250,000

          Adjustments for noncash effects:

           Depreciation expense                                              140,000

          Changes in operating assets and liabilities:

           Increase in accounts receivable                            (152,000)

        Decrease in inventory                                            108,000

           Decrease in prepaid expenses                                62,000

           Decrease in salaries payable                                  (30,000)

           Increase in income taxes payable                          44,000

 Net cash flows from operating activities                 $1,422,000

Net cash flows from operating activities                 $1,422,000