Starfire Company Uses the Indirect Method to Prepare the Statement

question 41

Essay

Starfire Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement:
$$\begin{array} { | l | r | r | } \hline \text { Sales revenue } & \$ 140,000 & \\\hline \text { Interest revenue } & 5,000 & \\\hline \text { Loss on sale of plant assets } & ( 4,000 ) & \\\hline \text { Total revenues and (losses) } & & \$ 141,000 \\\hline \text { Cost of goods sold } & 100,000 & \\\hline \text { Salary expense } & 23,000 & \\\hline \text { Depreciation expense } & 8,000 & \\\hline \text { Other operating expenses } & 9,000 & \\\hline \text { Interest expense } & 2,000 & \\\hline \text { Income tax expense } & 5,000 & \\\hline \text { Total expenses } & & \$ 147,000 \\\hline \text { Net income/(loss) } & & \$ ( 6,000 ) \\\hline\end{array}$$
Other information provided:
• Current assets other than cash decrease by $4,000.
• Current liabilities increase by $1,000.
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Please prepare the operating activities section of the statement of cash flows using the following format:
$$\begin{array} { | l | l | l | } \hline \text { Operating activities: } &\quad\quad & \quad\quad\\\hline \text { Net income } & & \\\hline \text { Adjustments } & & \\\hline \text { Depreciation expense } & & \\\hline \text { Gain or loss on sale } & & \\\hline \text { Increase/decrease in current assets } & & \\\hline \text { Increase/decrease in current liabilities } & & \\\hline \text { Net cash from operating activities } & & \\\hline\end{array}$$

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Definitions:

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