Cash flows from operating activities-indirect method
The net income reported on the income statement for the current year was $378,000. Depreciation recorded on equipment and a building amounted to $112,500 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
|
$100,800
|
$107,100
|
|
Accounts receivable (net)
|
127,800
|
132,120
|
|
Inventories
|
252,000
|
227,700
|
|
Prepaid expenses
|
14,040
|
15,120
|
|
Accounts payable (merchandise creditors)
|
112,680
|
119,520
|
|
Salaries payable
|
16,200
|
14,850
|
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method.
b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.