Cash flows from operating activities-indirect methodThe net income reported on the income statement for the current yearwas $93,700. Depreciation recorded on store equipment for the yearamounted to $31,200. Balances of the current asset and current liabilityaccounts at the beginning and end of the year are as follows: End of YearBeginning of YearCashAccounts receivable (net)InventoriesPrepaid expensesAccounts payable (merchandise creditors)Wages payable$24,10065,00047,2003,25023,4005,300$19,70056,00050,0008,00017,2006,400a. Prepare the "Cash flows from operating activities" section of thestatement of cash flows, using the indirect methodb. Briefly explain why net cash flow from operating activities isdifferent than net income.

The cash flow statement is prepared to find net cash inflow or outflow from the business.

Answered: Cash flows from operating…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 5E: Cash flows from operating activitiesindirect method The net income reported on the income statement...

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Cash flows from operating activities-indirect method
The net income reported on the income statement for the current year
was $93,700. Depreciation recorded on store equipment for the year
amounted to $31,200. Balances of the current asset and current liabilityaccounts at the beginning and end of the year are as follows:

	End of Year	Beginning of Year
Cash Accounts receivable (net) Inventories Prepaid expenses Accounts payable (merchandise creditors) Wages payable	$24,100 65,000 47,200 3,250 23,400 5,300	$19,700 56,000 50,000 8,000 17,200 6,400

a. Prepare the "Cash flows from operating activities" section of the
statement of cash flows, using the indirect method
b. Briefly explain why net cash flow from operating activities is
different than net income.

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