Bracewell Ltd. reported net income of £195,000 for 2017. Bracewell also reported depreciation expense of £40,000...

Bracewell Ltd. reported net income of £195,000 for 2017. Bracewell also reported depreciation expense of £40,000 and a gain of £5,000 on disposal of plant assets. The comparative statements of financial position show an increase in accounts receivable of £15,000 for the year, a £17,000 increase in accounts payable, and a £4,000 decrease in prepaid expenses.

Instructions: Prepare the operating activities section of the statement of cash flows for 2017. Use the direct method.

Expert Solution

BRACEWELL LTD.

Partial Statement of Cash Flows

For the Year Ended December 31, 2017

Cash flows from operating activities

Net income........................................................................................................... ₤195,000

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation expense.......................................................................... ₤40,000

Gain on disposal of plant assets ........................................................ (5,000)

Increase in accounts receivable.......................................................... (15,000)

Decrease in prepaid expenses.............................................................. 4,000

Increase in accounts payable............................................................... 17,000 41,000

Net cash provided by operating activities.............................................. ₤236,000

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