In: Accounting
The income statement disclosed the following items for the year:
Depreciation expense | $65,000 |
Gain on disposal of equipment | 27,500 |
Net income | 620,000 |
The changes in the current asset and liability accounts for the year are as follows:
Increase (Decrease) |
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Accounts receivable | $11,200 | ||
Inventory | (6,350) | ||
Prepaid insurance | (1,200) | ||
Accounts payable | (4,200) | ||
Income taxes payable | 1,650 | ||
Dividends payable | 2,500 |
a. Prepare the Cash Flows from Operating Activities section of the A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Statement of Cash Flows (partial) | ||
For the year ended Dec. 31, -- | ||
Cash flows from operating activities: | ||
Net income
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$ | |
Adjustments to reconcile net income to net cash flow from operating activities: | ||
Depreciation expense
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Gain on disposal of equipment
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Changes in current operating assets and liabilities: | ||
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Net cash flow from operating activities | $ |
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b. Why is net cash flows from operating activities different than net income?
Cash flows from operating activities is based on