13-07

Cash Flows from Operating Activities-Indirect Method The income statement disclosed the following items for year: Depreciation expense $59,600 Gain on disposal of equipment 34,790 Net income 410,200 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $9,290 Inventory (5,290) Prepaid insurance (1,980) Accounts payable (6,300) Income taxes payable 1,980 Dividends payable 1,390 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. Statement of Cash Flows (partial) For the year ended xxx Cash flows from operating activities: 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. Statement of Cash Flows (partial) For the year ended xxx Cash flows from operating activities: Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities b. Why is net cash flows from operating activities different than net income? Cash flows from operating activities is based on of accounting, whereas net income is computed using of accounting