Preparing the Operating Activities Section

The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc.

1. Net loss for the year was $36,000. Depreciation expense was $90,000.

2. Wrote off a $7,200 customer account. During the year, gross accounts receivable increased $180,000, and the allowance for doubtful accounts increased $18,000. All sales of $1,080,000 are on account.

3. Pension expense is $180,000 while funding for the pension plan was $144,000.

4. Deferred tax liability increased $144,000, income taxes payable decreased $36,000, and income tax expense was $396,000.

5. $36,000 of interest was capitalized. Interest expense recognized is $180,000. There is no change in interest payable.

6. Sold short-term investments (not held in a trading account) at a $7,200 gain, proceeds $28,800.

7. Merchandise inventory decreased by $18,000, accounts payable decreased by $9,000, and salaries payable increased by $25,200.

Required

Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method).

Note: If an item is not included in the operating activities section, leave the answer blank (zero).

Cash flows from Operating Activities
Net loss	Answer
Adjustments:
Depreciation expense	Answer
Pension expense	Answer
Income tax expense	Answer
Capitalized interest	Answer
Gain on sale of short-term investments	Answer
Increase in accounts receivable	Answer
Increase in deferred tax liability	Answer
Decrease in income taxes payable	Answer
Decrease in merchandise inventory	Answer
Decrease in accounts payable	Answer
Increase in salaries payable	Answer
Net cash provided (used) by operating activities	Answer