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The income statement and selected balance sheet information for Direct Products Company for the year ended December 31 are presented below. Income Statement Sales Revenue Expenses S 41,600 Cost of Goods Sold Depreciation Expense Salaries and Wages Expense Rent Expense Insurance Expense Interest Expense Utilities Expense 17,500 1,300 8,300 3,800 1,550 1,450 Net Income S 6,650 Selected Balance Sheet Accounts Ending Beginning Balances Balances Accounts Recelvable Inventory Accounts Payable Prepaid Rent Prepaid Insurance Salaries and Wages Payable Utilities Payable $570 820 430 29 27 600 685 480 32 43 17
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

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Answer:

Direct Products Company

Operating cash flow statement

For the year ended December 31, 202x

Net income                                                             $6,500

Adjustments to net income:

  • Depreciation expense $1,300
  • Decrease in accounts receivable $30
  • Decrease in prepaid insurance $5
  • Increase in salaries payable $23
  • Increase in utilities payable $7
  • Increase in inventory ($135)
  • Increase in prepaid rent ($7)
  • Decrease in accounts payable ($50)            $1,173

Net cash flow provided by operating activities   $7,673

Explanation:

Net Income $6,650

Depreciation Expense $1,300

                                          ending           beginning

Accounts Receivable        $570                $600

Inventory                            $820                $685

Accounts Payable             $430                $480

Prepaid Rent                        $29                  $22

Prepaid Insurance               $27                   $32

Salaries Payable                  $66                  $43

Utilities Payable                   $24                   $17

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