Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Beginning of Year Year Cash $75,000 Accounts receivable (net) 84,550 $86,150 90,000 175,000 Inventories 186,200 3,600 4,500 Prepaid expenses Accounts payable (merchandise creditors) Salaries payable 91,500 110,000 7,200 4,000 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 outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) 185,000 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Decrease in accounts receivable Increase in inventories 96,000 5,450 Net cash flow from operating activities $ 260,850 Feedback Check My Work a. Calculate the increases and decreases in the current asset/liability accounts over the period. What affect would these changes have on cash? b. If the direct method had been used, would the net cash flow from operating activities have been the same? Yes