-Harrell Company reported net income of $320,000 for the current year. Depreciation recorded on buildings and equipment amounted to $75,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year Beginning of Year
Cash $22,000 $15,000
Accounts receivable 17,000 32,000
Inventories 55,000 65,000
Prepaid expenses 7,500 5,000
Accounts payable 14,000 18,000
Income taxes payable 600 1,200
Instructions
Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.Harrell Company
Partial Statement of Cash Flows
Year Ended December 31, 2011
Net Cash Flows from Operating Activities
Net income $320,000
Adjustments for noncash effects:
Depreciation expense 75,000
Changes in operating assets and liabilities:
Decrease in accounts receivable 15,000
Decrease in inventories 10,000
Increase in prepaid expenses (2,500)
Decrease in accounts payable (4,000)
Decrease in income taxes payable (600)
Total changes in operating assets and liabilities 17,900
Total net cash flows from operating activities $412,900
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