Question

The net income reported on the income statement for the current year was $346,400. Depreciation recorded on equipment and a building amounted to $99,330 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	Beginning of Year
Cash	$90,570	$96,530
Accounts receivable (net)	111,490	119,020
Inventories	222,910	208,840
Prepaid expenses	13,500	14,540
Accounts payable (merchandise creditors)	96,260	103,590
Salaries payable	15,150	12,980

Required:

A.	Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
B.	If the direct method had been used, would the net cash flow from operating activities have been the same?

A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Amount Descriptions
Amortization of intangible assets
Decrease in accounts payable
Decrease in accounts receivable
Decrease in inventories
Decrease in prepaid expenses
Decrease in salaries payable
Depreciation
Increase in accounts payable
Increase in accounts receivable
Increase in inventories
Increase in prepaid expenses
Increase in salaries payable
Net cash flow from operating activities
Net cash flow used for operating activities
Net income
Net loss

Answer 1

	Answer =A)
	Statement of Cash Flows AS ON DECEMBER 31 2017
		Amount in $	Amount in $
	Net income		$          3,46,400
	Cash flows from operating activities
	Adjustments for:
	Depreciation	$             99,330
	Decrease in Account receivables	$                7,530
	(Increase) in inventories	$            -14,070
	Decrease in Prepaid Expenses	$                1,040
	Increase in salary payable	$                2,170
	Accounts payable ( Decrese)	$              -7,330
			$             88,670
	Net cash from operating activities		$          4,35,070
	Answer =B)
	If we can use the direct method than also the net cash flow frop operating activities will be same.
	So same cash flow in the both methos.