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Curwen Inc. reported net cash flow from operating activities of $180,900 on its statement of cash...

  1. Curwen Inc. reported net cash flow from operating activities of $180,900 on its statement of cash flows for a recent 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 $4,100
    Decrease in inventories 10,200
    Depreciation 15,700
    Gain on sale of investments 7,100
    Increase in accounts payable 2,800
    Increase in prepaid expenses 1,700
    Increase in accounts receivable 7,700

    a. Determine the net income reported by Curwen Inc. for the year ended December 31.
    $

    b. Curwen’s net income differed from cash flows from operations because of the following:

    1. Depreciation expense, which has no effect on cash flows from operating activities.
    2. Gain on the sale of investments is reported in investing activities section of the cash flow statement.
    3. Changes in current operating assets and liabilities that are added or deducted, depending on their effect on cash flow but not in the income statement.
    4. Operating expenses are deducted from income but are added in the cash flow statement.
    5. Dividends are deducted from the investing activities in cash flow statement but are a charge against income in the income statement.

Solutions

Expert Solution

Req a - Net Income $165,700

Curwen Inc.
Cashflow Statement - Indirect method
Cash flows from Operating Activities
Net cash flow from operating activities                   180,900
Non cash adjustments
Depreciation expense                   (15,700)
Changes in current operating assets and liabilities
Increase in accounts receivable                       7,700
Decrease in inventories                   (10,200)
Increase in prepaid expenses                       1,700
Increase in accounts payable                     (2,800)
Decrease in income taxes payable                       4,100
Net Income                   165,700
Req b
Curwen’s net income differed from cash flows from operations because of the following:
1 Depreciation expense, which has no effect on cash flows from operating activities
3 Changes in current operating assets and liabilities that are added or deducted,
depending on their effect on cash flow but not in the income statement.

ekkarill92 answered 1 year ago
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