The Net Income Reported on the Income Statement for the Current

question 114

Essay

The net income reported on the income statement for the current year was $210,000. Depreciation recorded on equipment and a building amount to $62,500 for the year. Balances of the current assets and current liabilities accounts at the beginning and end of the year are as follows:​​ ​
(a)Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method.
(b)If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

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Definitions:

Financial Data

Information related to the financial status of an individual or organization, including income, expenses, assets, and liabilities.

Acid-Test Ratio

A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Financial Data

Numerical information related to monetary transactions, financial status, and performance of a company, used for analysis and decision-making.

Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term liquidity.