Question
In: Accounting
Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow...
Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow from operating activities of $193,000 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $3,700 Decrease in inventories 9,300 Depreciation 14,300 Gain on sale of investments 6,400 Increase in accounts payable 2,600 Increase in prepaid expenses 1,600 Increase in accounts receivable 7,000 a. Determine the net income reported by Curwen Inc. for the year ended December 31. $ b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference? Because depreciation expense which has no effect on cash flows from operating activities. Changes in current operating assets and liabilities that are added or deducted. Changes in fixed assets and liabilities that are added or deducted. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements. Pick two.
Solutions
Expert Solution
| Cash Flow Statement | |||
| Indirect Method | |||
| Cash Flow from Operating Activities | |||
| Net Income | $ 185,500 | ||
| Adjustments | |||
| Depreciation | $ 14,300 | ||
| Gain on sale of Investments | $ -6,400 | ||
| Changes in Current Assets/ Current Liabilities | |||
| Increase in Accounts Receivable | $ -7,000 | ||
| Increase in Prepaid Expenses | $ -1,600 | ||
| Decrease in Inventories | $ 9,300 | ||
| Increase in Accounts Payable | $ 2,600 | ||
| Decrease in Income Tax Payable | $ -3,700 | ||
| Total Adjustments | $ 7,500 | ||
| Cash from Operating Activities | $ 193,000 | ||
Net Income = $185500 i.e. $193000 - $7500
Answer is
Because depreciation expense which has no effect on cash flows from
operating activities (as it is non cash expense)
Changes in current operating assets and liabilities that are added
or deducted
ekkarill92 answered 1 year agoRelated Solutions
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Accounts receivable (net)
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31,670
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Prepaid expenses
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End of Year
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Accounts receivable (net)
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100,520
Inventories
195,830
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Prepaid expenses
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Accounts payable (merchandise creditors)
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End of Year
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Accounts receivable (net)
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Merchandise inventory
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the year are as follows:
End of Year
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Accounts receivable (net)
90,950
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Inventories
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Accounts receivable (net)
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Inventories
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Prepaid expenses
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Accounts receivable (net)
37,520
35,580
Inventories
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54,160
Prepaid expenses
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Accounts receivable (net)
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