[Problem ]

E13.4 (LO 2) Selected information from Juno Ltd.s statement of financial position and statement of income is as follows:

Juno Ltd. Statement of Financial Position (partial) December 31
	2021	2020
Current assets
Accounts receivable	$7,000	$12,000
Inventory	5,900	4,500
Prepaid expenses	3,000	2,500
Current liabilities
Accounts payable	3,750	2,500
Income tax payable	1,200	800
Property tax payable	2,500	1,500
Bank loan payablecurrent portion	5,000	10,000

Juno Ltd. Statement of Income Year Ended December 31, 2021
Sales	$190,000
Cost of goods sold	114,000
Gross profit	76,000
Operating expenses	50,000
Income from operations	26,000
Interest expense	1,200
Income before income tax	24,800
Income tax expense	3,800
Net income	$21,000

Additional information:

1.The bank loan was received in the past to finance the purchase of equipment.

2.Operating expenses included depreciation expense of $11,000 and a loss of $5,000 on the disposal of equipment.

Instructions

: Prepare the operating activities section of the statement of cash flows, using the indirect method.

Classify activitiesindirect method.

[Solution]

EXERCISE 13.4

JUNO LTD.

Statement of Cash Flows (Partial)

Year Ended December 31, 2021

Operating activities

Net income $21,000

Adjustments to reconcile net income to net

cash provided (used) by operating activities

Depreciation expense $11,000

Loss on disposal of equipment 5,000

Decrease in accounts receivable 5,000

Increase in inventory (1,400)

Increase in prepaid expenses (500)

Increase in accounts payable 1,250

Increase in income tax payable 400

Increase in property tax payable 1,000

SUm =21,750

Net cash provided by operating activities $42,750

Note: The current portion of the bank loan payable was not included because this bank loan was issued for borrowing purposes rather than trade.

[Adjustments to net income include depreciation (+); loss (+); decrease in noncash current assets (+); increase in noncash current assets (-); and increase in current liabilities (+)]

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[ Question ] I wonder why income tax payable and property tax payable did not subtract.