Operating Activities SectionIndirect Method

The following account balances for the noncash current assets and current liabilities of Suffolk Company are available:

	December 31
	2017		2016
Accounts receivable	$43,090		$34,540
Inventory	29,560		40,340
Prepaid rent	16,860		15,030
Totals	$89,510		$89,910
Accounts payable	$25,650		$19,030
Income taxes payable	6,160		10,190
Interest payable	15,110		12,190
Totals	$46,920		$41,410

Net income for 2017 is $43,820. Depreciation expense is $19,330. Assume that all sales and all purchases are on account.

Required:

1. Prepare the Operating Activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Suffolk Company Partial Statement of Cash Flows For the Year Ended December 31, 2017

Cash Provided by Operating Activities
Decrease in accounts payableDecrease in accounts receivableDecrease in prepaid rentIncrease in income taxes payableNet incomeNet income	$Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease in accounts payableDecrease in accounts receivableDecrease in prepaid rentDepreciation expenseIncrease in income taxes payableIncrease in inventoryDepreciation expense	Depreciation expense
Decrease in accounts payableDecrease in accounts receivableDecrease in interest payableIncrease in accounts receivableIncrease in income taxes payableIncrease in inventoryIncrease in accounts receivable	Increase in accounts receivable
Decrease in accounts payableDecrease in accounts receivableDecrease in interest payableDecrease in inventoryIncrease in income taxes payableIncrease in inventoryDecrease in inventory	Decrease in inventory
Decrease in accounts payableDecrease in accounts receivableDecrease in prepaid rentIncrease in income taxes payableIncrease in inventoryIncrease in prepaid rentIncrease in prepaid rent	Increase in prepaid rent
Decrease in accounts payableDecrease in accounts receivableDecrease in prepaid rentIncrease in accounts payableIncrease in income taxes payableIncrease in inventoryIncrease in accounts payable	Increase in accounts payable
Decrease in accounts payableDecrease in accounts receivableDecrease in income taxes payableDecrease in prepaid rentIncrease in income taxes payableIncrease in inventoryDecrease in income taxes payable	Decrease in income taxes payable
Decrease in accounts payableDecrease in accounts receivableDecrease in interest payableIncrease in income taxes payableIncrease in interest payableIncrease in inventoryIncrease in interest payable	Increase in interest payable
Net cash inflow from operating activitiesNet cash outflow from operating activitiesNet cash inflow from operating activities	$Net cash inflow from operating activities

Feedback

The indirect method involves reporting net cash flow from operating activities and is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments and all accruals of future operating cash receipts and payments. Some items reported on the income statement do not use cash, so they need to be adjusted for on the cash flow statement.

2. Net cash inflow from operating activities is $fill in the blank 6d7f45f95fb7f83_1 and the primary reason why it is higher than net income is

decrease in inventorydecrease in prepaid rentdepreciationincrease in accounts payableincrease in interest payableincrease in inventorydepreciation

. Other reasons for the higher amount of net cash inflow from operating activities are

increase in inventoryincrease in accounts payableincrease in accounts receivabledecrease in accounts payabledecrease in accounts receivabledecrease in income taxes payableincrease in accounts payable

and

increase in inventoryincrease in accounts receivableincrease in prepaid rentdecrease in inventorydecrease in interest payabledecrease in income taxes payabledecrease in inventory

.