Question

Service Company had net income during the current year of $115,500. The following information was obtained from Service’s balance sheet:
Accounts receivable ................ $22,300 increase
Inventory .................... 28,700 increase
Accounts payable ................ 14,240 decrease
Interest payable ................ 3,180 increase
Accumulated depreciation (equipment) ........ 27,800 increase
Accumulated depreciation (building) ........ 12,340 increase
Additional Information:
1. Equipment with accumulated depreciation of $15,000 was sold during the year.
2. Cash dividends of $36,000 were paid during the year.

Required:
1. Prepare the net cash flows from operating activities using the indirect method.
2. How would the cash proceeds from the sale of equipment be reported on the statement of cash flows?
3. How would the cash dividends be reported on the statement of cash flows?
4. What could the difference between net income and cash flow from operating activities signal to financial statement users?


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  • CreatedSeptember 22, 2015
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