Q14-5SE Question: Computing cash flows f... [FREE SOLUTION]

Chapter 14: Q14-5SE (page 770)

Question: Computing cash flows from operating activities鈥攊ndirect method
Winding Road Cellular accountants have assembled the following data for the year ended April 30, 2018:
Cash receipt from sale of land $ 27,000
Net income $ 55,000
Depreciation expense 2,000
Cash purchase of equipment 44,000
Cash payment of dividends 5,800
Decrease in current liabilities 20,000
Cash receipt from issuance of common stock 17,000
Increase in current assets other than cash 27,000
Prepare the operating activities section using the indirect method for Winding Road Cellular鈥檚 statement of cash flows for the year ended April 30, 2018.

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Answer

Net cash provided by operating activities is $10,000

Indirect method starts with net income and adjustments are made to reconcile net income to net cash provided by operating activities.

Cash flows from operating activities
Net Income		$55,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$2,000
Increase in current assets other than cash	($27,000)
Decrease in current liabilities	($20,000)
Net cash provided by operating activities		$10,000