FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Changes in current operating assets and liabilities:
Increase in accounts receivable
2,000 X
Decrease in merchandise inventory
Increase in prepaid expenses
Increase in accounts payable
Decrease in wages payable
2,270 x
Net cash flow from operating activities
135,900 x
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a. Calculate the increases and decreases in the current asset/liability accounts over the period. Determine what affect these changes
would have on cash.
b. Cash flows from operating activities differ from net income because it does not use the
of accounting. For example
revenues are recorded on the income statement when
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V Check My Work
b. Review the definition of accrual accounting. How does this differ with the concept of cash flow payments and receipts?
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Transcribed Image Text:Changes in current operating assets and liabilities: Increase in accounts receivable 2,000 X Decrease in merchandise inventory Increase in prepaid expenses Increase in accounts payable Decrease in wages payable 2,270 x Net cash flow from operating activities 135,900 x Feedback V Check My Work a. Calculate the increases and decreases in the current asset/liability accounts over the period. Determine what affect these changes would have on cash. b. Cash flows from operating activities differ from net income because it does not use the of accounting. For example revenues are recorded on the income statement when Feedback V Check My Work b. Review the definition of accrual accounting. How does this differ with the concept of cash flow payments and receipts?
Cash Flows from (Used for) Operating Activities
The net income reported on the income statement for the current year was $116,600. Depreciation recorded on store equipment for the yea
amounted to $19,200. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End
Beginning
of Year
of Year
Cash
$44,770
$40,740
Accounts receivable (net)
32,100
30,110
Merchandise inventory
43,830
45,830
Prepaid expenses
4,920
3,870
Accounts payable (merchandise creditors)
41,950
38,540
Wages payable
22,920
25,180
a. Prepare the Cash Flows from (used for) Operating Activities section of the 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)
Cash flows from operating activities:
Net income
116,600
Adjustments to reconcile net income to net cash flows from (used for) operating activities:
Depreciation
19,200 v
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Transcribed Image Text:Cash Flows from (Used for) Operating Activities The net income reported on the income statement for the current year was $116,600. Depreciation recorded on store equipment for the yea amounted to $19,200. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End Beginning of Year of Year Cash $44,770 $40,740 Accounts receivable (net) 32,100 30,110 Merchandise inventory 43,830 45,830 Prepaid expenses 4,920 3,870 Accounts payable (merchandise creditors) 41,950 38,540 Wages payable 22,920 25,180 a. Prepare the Cash Flows from (used for) Operating Activities section of the 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) Cash flows from operating activities: Net income 116,600 Adjustments to reconcile net income to net cash flows from (used for) operating activities: Depreciation 19,200 v
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