Question

In: Accounting

1) For each item listed below, indicate the effect on net income in arriving at cash...

1)

For each item listed below, indicate the effect on net income in arriving at cash flows from operations by choosing one of the following code letters.

Code

Cash Flows from Operating Activities

Add to Net Income A

Deduct from Net Income D

1. A decrease in accounts receivable

2. Increase in inventory

3. Increase in prepaid expenses

4. A decrease in accounts payable

5. Decrease in accrued liabilities

6. Increase in income taxes payable

7. Depreciation expense

8. Loss on sale of investment

9. Gain on disposal of equipment

10. Depletion expense

2)

Please complete the following:

Net Income......................................................................................... $177,000

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense, $15,000........................................................ _______

Increase in accounts receivable, $45,000........................................... _______

Increase in inventory, $22,000......................................................... _______

Decrease in accounts payable, $11,800............................................. _______

Increase in income taxes payable, $1,500.......................................... _______

Gain on sale of land, $5,000............................................................ _______

Net cash provided (used) by operating activities.................................. _______

Expert Solution

1) Classification

1. A decrease in accounts receivable	A
2. Increase in inventory	D
3. Increase in prepaid expenses	D
4. A decrease in accounts payable	D
5. Decrease in accrued liabilities	D
6. Increase in income taxes payable	A
7. Depreciation expense	A
8. Loss on sale of investment	A
9. Gain on disposal of equipment	D
10. Depletion expense	A

2) Calculate following

Net income		177000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	15000
Increase in account receivable	-45000
Increase inventory	-22000
Decrease account payable	-11800
Increase in income tax payable	1500
Gain on Sale of land	-5000
		-67300
Net Cash provided (used) by operating activities		109700

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