Question

Portions of the financial statements for Peach Computer are provided below. PEACH COMPUTER Income Statement For the year ended December 31, 2021 Net sales $ 1,725,000 Expenses: Cost of goods sold $ 1,020,000 Operating expenses 530,000 Depreciation expense 47,000 Income tax expense 37,000 Total expenses 1,634,000 Net income $ 91,000 PEACH COMPUTER Selected Balance Sheet Data December 31 2021 2020 Increase (I) or Decrease (D) Cash $ 99,000 $ 83,500 $ 15,500 (I) Accounts receivable 46,300 50,500 4,200 (D) Inventory 72,000 53,500 18,500 (I) Prepaid rent 2,700 4,400 1,700 (D) Accounts payable 42,000 35,500 6,500 (I) Income tax payable 4,700 8,500 3,800 (D) Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method.

Answer 1

PEACH COMPUTER

Operating Activities Section of Cashflow Statement

Cash flows from operating activities: $91,000

Adjustments to reconcile net income to

net cashflows from operating activities:

Add: Depreciation $47,000

Changes in operating assets and liabilities:

Increase in Inventory ($18,500)

Decrease in accounts receivable $4,200

Increase in Accounts Payable $6,500

Decrease in Prepaid rent $1,700

Decrease in Income tax payable ($3,800) $‭37,100‬

Net Cash from Operating activities $128,100