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Cash Flow from Operating Activities (Indirect Method) The Arcadia Company owns no plant assets and had the following income statement for the year: Sales revenue Cost of goods sold $871,000 Wages expense 273,000 Rent expense Utilities expense 19,500 1.218,100 Net income $1,235,000 54,600 $16,900 Additional information about the company includes End of Year Beginning of Year Accounts receivable $83,200 $76,700 78,000 111,800 9,100 36,400 7,800 Inventory Prepaid rent Accounts payable Wages payable 10,400 28,600 11,700 Use the preceding information to calculate the cash flow from operating activities using the indirect methocd. Remember to use negative signs with your answers when appropriate. Cash Flow from Operating Activities Net Income 0 Add (deduct) items to convert net income to cash basis Accounts Receivable Inventony Prepaid Rent Accounts Payable Wages Payable 0 Cash Provided by Operating Activities

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Answer:

Sales revenue $1,235,000

Cost of goods sold $871,000

Wages expense $273,000

Rent expense $54,600

Utilities expense $19,500

Net income   $16,900

                                               End of Year      Beginning of Year

Accounts receivable                $83,200               $76,700       ($6,500)

Inventory                                   $78,000               $111,800       $33,800

Prepaid rent                               $10,400                 $9,100         ($700)

Accounts payable                    $28,600               $36,400       ($7,800)

Wages payable                          $11,700                  $7,800        $3,900

                           Arcadia Company

               Cash flow from Operating Activities

Net Income                                                                 $16,900

Adjusting entries to reconcile net income               $22,700

  • Decrease in inventory $33,800
  • Increase in wages payable $3,900
  • Increase in accounts receivable ($6,500)
  • Increase in prepaid rent ($700)
  • Decrease in accounts payable ($7,800)

Net cash flow from operating activities                  $36,900                                                                                    

 

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