Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $117,500. Depreciation recorded on store equipment for the year amounted to $19,400. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year		Beginning of Year
Cash	$47,120		$42,880
Accounts receivable (net)	33,790		31,690
Inventories	46,130		48,240
Prepaid expenses	5,180		4,070
Accounts payable (merchandise creditors)	44,150		40,560
Wages payable	24,130		26,500

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)

Cash flows from operating activities:
Decrease in prepaid expensesDepreciationIncrease in inventoriesNet income	$- Select -
Adjustments to reconcile net income to net cash flow from operating activities:
Decrease in accounts payableDecrease in accounts receivableDepreciationIncrease in wages payable	- Select -
Changes in current operating assets and liabilities:
DepreciationIncrease in accounts receivableIncrease in inventoriesIncrease in wages payable	- Select -
Decrease in accounts receivableDecrease in inventoriesDecrease in prepaid expensesIncrease in inventories	- Select -
Decrease in accounts receivableIncrease in inventoriesIncrease in prepaid expensesIncrease in wages payable	- Select -
Decrease in accounts payableDepreciationIncrease in accounts payableIncrease in wages payable	- Select -
Decrease in accounts receivableDecrease in prepaid expensesDecrease in wages payableIncrease in wages payable	- Select -
Net cash flow from operating activities		$fill in the blank 7c5a06fac01e078_15

b. Cash flows from operating activities differs from net income because it does not use the

accrual basiscash basisaccrual basis

of accounting. For example revenues are recorded on the income statement when

they are earnedcash is receivedthey are earned

.