You Are Preparing a Statement of Cash Flows

question 48

Essay

You are preparing a Statement of Cash Flows. Complete the following schedule to compute cash flow from operating activities:
Statement of Cash Flows $\begin{array}{|l|l|}\hline \text { Net Income (accrual basis), } \$ 50,000 & \$ \\\hline \text { Adjustments to reconcile net income to cash from operating activities: } & \\\hline \text { (a) Depreciation expense, } \$ 8,000 & \\\hline \text { (b) Inventory increase, } \$ 5,000 & \\\hline \text { (c) Wages payable decrease, } \$ 6,000 & \\\hline \text { (d) Accounts receivable decrease, } \$ 10,000 & \\\hline \text { (e) Accounts payable increase, } \$ 7,000 & \\\hline \text { (f) Cash dividends declared and paid, } \$ 4,000 & \\\hline \text { (g) Increase in income tax payable, } \$ 3,000 & \\\hline \text { (h) Gain on sale of capital assets, } \$ 1,000 \text {; book value, } \$ 7,500 & \\\hline \text { (i) Payment on long-term note, } \$ 20,000 & \\\hline \text { Cash flow from operating activities } & \$ \\\hline\end{array}$

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Definitions:

Accounts Receivable

The sum of money that customers owe to a company for products or services that have been provided but not yet compensated for.

Speed Up Payments

Actions or policies implemented to reduce the time it takes to receive payments from customers, thereby improving cash flow.

Lockboxes

A service provided by banks to process payments more quickly by having checks sent to a special post office box instead of the company's address.