Question

Software Distributors reports net income of $58,000. Included in that number is depreciation expense of $11,500 and a loss on the sale of land of $5,300. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $16,500, and an increase in accounts payable of $48,000. Required: Prepare the operating activities section of the statement of cash flows using the indirect method.

Answer 1

Software Distributors

Statement of cash flows (partial)

Cash flow from operating activities:

Net income $58,000

Adjustments to reconcile net income to

net cash flows from operating activities

Add: Depreciation expense $11,500

Add: Loss on sale of land $5,300

Add: Decrease in accounts receivable $28,000

Add: Decrease in inventory $16,500

Add: Increase in accounts payable $48,000

Net cash flow from operating activities $167,300