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Amazing Industries began 2018 with accounts receivable, inventory, and prepaid expenses totaling $53,000 and its total current liabilities totaling $34,000
Amazing Industries began 2018 with accounts receivable, inventory, and prepaid expenses totaling $53,000 and its total current liabilities totaling $34,000. At the end of the year, these same current assets totaled $48,000, while its total current liabilities totaled $38,000. Net income for the year was $20,000. Included in net income were a $2,000 gain on the sale of land and depreciation expense of $7,000. Show how Amazing should report cash flows from operating activities for 2018. The company uses the indirect method. (Use parentheses or a minus sign for numbers to be subtracted and for a net decrease in cash.) Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by (used for) operating activities: Net cash provided by (used for) operating activities
Expert Solution
| Cash flows from Operating Activities | ||
| Net Income | 20,000 | |
| Adjustmentsto reconcile net income to net cash provided by (used for) operating activities | ||
| Depreciation | 7,000 | |
| Gain on sale of land | (2,000) | |
| Decrease in current assets | 5,000 | |
| Increase in current liabilities | 4,000 | 14,000 |
| Net cash provided by (used for) operating activities | 34,000 |
Workings:
Decrease in current assets = Beginning accounts receivable,inventory and prepaid expenses - Ending total current assets
= 53,000 - 48,000
= 5,000
Increase in current liabilities = Ending current liabilities - beginning current liabilities
= 38,000 - 34,000
= 4,000
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