Question

Portions of the financial statements for Horizon Telecom are provided below.  

HORIZON TELECOM Income Statement For the Year Ended December 31, 2018
Revenues		$618,000
Expenses:
Cost of goods sold	$370,000
Operating expenses	110,000
Depreciation expense	33,000
Income tax expense	52,500
Total expenses		565,500
Net Income		$ 52,500

HORIZON TELECOM Selected Balance Sheet Data December 31, 2018
Increase in accounts receivable	$ 5,300
Increase in inventory	12,500
Decrease in prepaid rent	9,400
Increase in operating expenses payable	6,600
Decrease in accounts payable	7,200
Increase in income tax payable	20,200

Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the indirect method. (Amounts to be deducted and negative values should be indicated by minus sign.)

cash flows from operating activities
adjustments for noncash effects:
cahnges in current assets and current liabilities:
net cash flows operating activities

Answer 1

• All working if required, forms part of the answer
• Cash Flow from operating activities, as asked:

Cash flows from operating activities
Net Income		$                  52,500
Adjustments for noncash effects:
Depreciation expense		$                  33,000
Changes in current assets and current liabilities:
Increase in accounts receivable	$                     (5,300)
Increase in inventory	$                   (12,500)
Decrease in prepaid rent	$                        9,400
Increase in operating expenses payable	$                        6,600
Decrease in accounts payable	$                     (7,200)
Increase in income tax payable	$                     20,200
		$                  11,200
Net cash flows operating activities		$                  96,700