Computing Cash Flows from Operating Activities: IndirectMethod

During 2014, Ortega Corporation had net income of $82,000.Included on its income statement were depreciation expense of$4,600 and amortization expense of $600. During the year, AccountsReceivable increased by $6,800, Inventories decreased by $3,800,Prepaid Expenses decreased by $400, Accounts Payable increased by$10,000, and Accrued Liabilities decreased by $900.

Determine net cash flows from operating activities using theindirect method.

Question

Computing Cash Flows from Operating Activities: IndirectMethod

During 2014, Ortega Corporation had net income of $82,000.Included on its income statement were depreciation expense of$4,600 and amortization expense of $600. During the year, AccountsReceivable increased by $6,800, Inventories decreased by $3,800,Prepaid Expenses decreased by $400, Accounts Payable increased by$10,000, and Accrued Liabilities decreased by $900.

Determine net cash flows from operating activities using theindirect method.

	Vince Gill Company
	Income Statement
	For year ended December 31, 2014
Sales Revenue		$6,947,090
Cost of Goods Sold
Beginning inventory	$1,890,710
Purchases	4,323,810
Goods available for sale	6,214,520
Ending inventory	1,601,450
Cost of goods sold		4,613,070
Gross Profit		2,334,020
Operating expenses
Selling expenses	446,970
Admin expenses	709,920	1,156,890
Net income		1,177,130

1.		Accounts receivable decreased $316,040 during the year.
2.		Prepaid expenses increased $175,400 during the year.
3.		Accounts payable to suppliers of merchandise decreased $283,580during the year.
4.		Accrued expenses payable decreased $115,830 during theyear.
5.		Administrative expenses include depreciation expense of$54,760.

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