Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 6, Problem 6.26BE
Statement of
BE6-25. Statement of Cash Flows, Indirect Method. Tennis Emporium provided the following information for the current year.
| Tennis Emporium Statement of Net Income for the Current Year Ended | Amount |
| Sales | $767,000 |
| Depreciation Expense | (52,000) |
| Selling, General, and Administrative Expanses | (688,000) |
| Operating Income | 27,000 |
| Tax Expense | (6,000) |
| Net Income | $21,000 |
| Changes in |
|
| Increase in |
$10,000 |
| Increase in Accounts Payable (Related to Selling, General, and Administrative Expenses) | $ 5,000 |
| Decrease in Income Taxes Payable | $ 3,000 |
Compute the net cash flow from operating activities for Tennis Emporium under the indirect reporting format.
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Using the Exhibit below, assume that the depreciation expense on the Income Statement for the year was $38,000. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of depreciation expense on the Cash flow from operating activities section?
EXHIBIT
Increase
(Decrease)
Net Income (loss) $XXX
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation of fixed assets XXX
Losses on disposal of assets XXX
Gains on disposal of assets (XXX)
Changes in current operating assets and liabilities:…
Cash Flows from Operating Activities-Indirect Method
The income statement disclosed the following items for the year:
Depreciation expense
Gain on disposal equipment
Net Income
The changes in the current asset and liability accounts for the year are as follows:
Increase
(Decrease)
$33,700
19,670
209,300
Accounts receivable
Inventory
Prepaid insurance
Accounts payable
Income taxes payable
Dividends payable
a. Prepare the "Cash flows from operating activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
Cash flows from operating activities:
$5,250
(2,990)
(1,120)
(3,560)
1,120
790
Statement of Cash Flows (partial)
Adjustments to reconcile net income to net cash flow from operating activities:
Net cash flow from operating activities
Changes in current operating assets and liabilities:
b. Why is net cash flows from operating activities different than net…
Cash flows from (used for) operating activities-indirect method
The net income reported on the income statement for the current year was $106,800. Depreciation recorded on store equipment for the year amounted to $41,700. Balances of the current asset and current liability accounts at the beginning and
end of the year are as follows:
Cash
Accounts receivable (net)
Inventories
End of Year Beginning of Year
$24,100
65,000
47,200
3,250
23,400
4,700
$19,700
54,000
52,000
Prepaid expenses
6,000
Accounts payable (merchandise creditors)
18,500
6,400
Wages payable
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)
Line Item Description
Cash flows from (used for) operating activities:
Adjustments to reconcile net income to net cash flows from (used for) operating activities:…
Chapter 6 Solutions
Intermediate Accounting
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