Question

Suppose your company reports $160 of net income and $40 of cash dividends paid, and its comparative balance sheet indicates the following. Beginning Ending Cash $ 35 $ 205 Accounts Receivable 75 175 Inventory 245 135 Total $ 355 $ 515 Salaries and Wages Payable $ 10 $ 50 Common Stock 100 100 Retained Earnings 245 365 Total $ 355 $ 515 Required: Prepare the operating activities section of the statement of cash flows, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer and Explanation:

The preparation of the operating activities section of the cash flow statement using the indirect method is shown below:

Cash flow from operating activities

Net income $160

Add or less adjustments made

Less Increase in account receivable $100 ($175 - $75)

Add: Decrease in inventory $110 ($245 - $135)

Add: Increase in salaries and wages payable $40 ($50 - $10)

Net cash provided by operating activities $210

The cash inflow represents in a positive sign and cash outflow represents in negative sign

Answer 2

The operating activities section of the statement of cash flows, using the indirect method is $210.

Cash flow from operating activities

Net income $160

 Increase in account receivable ($100)

($175 - $75)

Decrease in inventory $110

($245 - $135)

Increase in salaries and wages payable $40

($50 - $10)

Net cash flow from operating activities $210

Inconclusion the operating activities section of the statement of cash flows, using the indirect method is $210.

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