Suppose your company sells services of $150 in exchange for $120 cash and $30 on account. Depreciation of $50 also is recorded.
1. Prepare the journal entries to record these transactions.
- Record the service revenue of $120 for cash and $30 on account.
- Record depreciation of $50.
2. Calculate the amount that should be reported as net cash flow from operating activities.
Net Cash Flow =
3. Calculate the amount that should be reported as net income.
Net Income =
4. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).
Net Income =
Depreciation =
Increase in Accounts Receivable =
Net Cash Flow from Operating Activities =