Avatar Company Uses the Indirect Method to Prepare the Statement

question 33

Essay

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement:
$$\begin{array} { | l | r | r | } \hline \text { Sales revenue } & \$ 240,000 & \\\hline \text { Interest revenue } & 1,000 & \\\hline \text { Gain on sale of plant assets } & 4,000 & \\\hline \text { Total revenues and gains } & & \$ 245,000 \\\hline \text { Cost of goods sold } & 110,000 & \\\hline \text { Salary expense } & 45,000 & \\\hline \text { Depreciation expense } & 12,000 & \\\hline \text { Other operating expenses } & 23,000 & \\\hline \text { Interest expense } & 1,000 & \\\hline \text { Income tax expense } & 5,000 & \\\hline \text { Total expenses } & & \$ 196,000 \\\hline \text { Net income/(loss) } & & \$ 49,000 \\\hline\end{array}$$
Other information provided:
• Current assets other than cash increase by $24,000.
• Current liabilities decrease 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:

Conditioned Stimulus

A previously neutral stimulus that, after association with an unconditioned stimulus, comes to trigger a conditioned response.

Conditioned Response

A learned reaction to a specific stimulus as a result of conditioning, demonstrated in Pavlov's experiments with dogs.

Tone

The quality or character of sound, or in literature, the author's attitude towards the subject or audience.

Blinking

The rapid closing and opening of the eyelid, a reflex that helps to protect the eye from irritants and distribute tear fluid.