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Ex 16 - 5 Solution

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Wepa Akiyew
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32 views1 page

Ex 16 - 5 Solution

Uploaded by

Wepa Akiyew
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Ex.

16-5
a. Cash flows from operating activities:
Net income
$73,600
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation 27,400
Changes in current operating assets and liabilities:
Increase in accounts receivable (8,000)
Decrease in merchandise inventory 4,500
Decrease in prepaid expenses 2,250
Increase in accounts payable 5,000
Decrease in wages payable (900)
Net cash flow from operating activities $103,850
b. Cash flows from operating activities shows the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
expenses for a company using the accrual basis of accounting. Revenues are
recorded when they are earned, not necessarily when cash is received. Expenses
are recorded when they are incurred and matched against revenue, not
necessarily when cash is paid. As a result, the cash flows from operating activities
differs from net income because it does not use the accrual basis of accounting.

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