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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net cash flow from operating activities of $180,900 on its
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Decrease in income taxes payable
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Accounts receivable (net)
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31,670
Inventories
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48,220
Prepaid expenses
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The net income reported on the income statement for the current
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End of Year
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$81,460
Accounts receivable (net)
99,320
100,520
Inventories
195,830
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Prepaid expenses
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Accounts payable (merchandise creditors)
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Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
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The net income reported on the income statement for the current
year was $126,900. Depreciation recorded on store equipment for the
year amounted to $20,900. Balances of the current asset and current
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End of Year
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Cash
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Accounts receivable (net)
34,570
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Merchandise inventory
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Prepaid expenses
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Accounts payable (merchandise creditors)
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building amounted to $78,300 for the year. Balances of the current
asset and current liability accounts at the beginning and end of
the year are as follows:
End of Year
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$71,730
$74,600
Accounts receivable (net)
90,950
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Inventories
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Prepaid expenses
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Accounts receivable (net)
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Inventories
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Prepaid expenses
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End of Year
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$48,140
Accounts receivable (net)
37,520
35,580
Inventories
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54,160
Prepaid expenses
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4,570
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Accounts receivable (net)
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