Differences between cash flow from operations and net income


Response to the following problem:

Oregon Company disclosed the following information for its recent calendar year.

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000

Expenses

Salaries expense . . . . . . . . . . . . . . . . . . . . 68,000

Utilities expense . . . . . . . . . . . . . . . . . . . . 28,000

Depreciation expense . . . . . . . . . . . . . . . . 29,200

Other expenses . . . . . . . . . . . . . . . . . . . . 6,800

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (32,000)

Accounts receivable decrease . . . . . . . . . . . $ 28,000

Purchased a machine . . . . . . . . . . . . . . . . . . . 20,000

Salaries payable increase . . . . . . . . . . . . . . . . 26,000

Other accrued liabilities decrease . . . . . . . . 16,000

Required

1. Prepare the operating activities section of the statement of cash flows using the indirect method.

2. What were the major reasons that this company was able to report a net loss but positive cash flow from operations?

3. Of the potential causes of differences between cash flow from operations and net income, which are the most important to investors?

Solution Preview :

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Accounting Basics: Differences between cash flow from operations and net income
Reference No:- TGS02946005

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