The Net Income Reported on the Income Statement for the Current

question 45

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 asset and current liabilities accounts at the beginning and end of the year are as follows:
$\begin{array}{|l|r|r|}\hline &\text {End of Year} & \text { Beginning of Yea}\\\hline \text { Cash } & \$ 56,000 & \$ 59,500 \\\hline \text { Accounts receivable net } & 71,000 & 73,400 \\\hline \text { Inventories } & 140,000 & 126,500 \\\hline \text { Prepaid expenses } & 7,800 & 8,400 \\\hline \text { Accounts payable merchandise creditors } & 62,600 & 66,400 \\\hline \text { Salaries payable } & 9,000 & 8,250\\\hline \end{array}$ Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows,using the indirect method.
2. If the direct method had been used,would the net cash flow from operating activities have been the same? Explain.

---

Definitions:

Office

A room or set of rooms where business, professional, or administrative work is conducted.

Ordinary Bailment

A legal relationship where one party (the bailor) transfers physical possession of personal property to another party (the bailee) for a specific purpose, without transferring ownership.

Rights and Liabilities

Legal entitlements and obligations that individuals or entities possess in a legal agreement or under the law.

Party

An individual or entity involved in a legal agreement or dispute.