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29 September, 14:00

The accounting records of EZ Company provided the data below.

Net income $ 50,000

Depreciation expense 7,000

Increase in inventory 1,500

Decrease in salaries payable 800

Decrease in accounts receivable 2,000

Amortization of patent 500

Amortization of premium on bonds 1,000

Increase in accounts payable 4,000

Cash dividends paid 12,000.

Prepare a reconciliation of net income to net cash flows from operating activities.

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  1. 29 September, 17:40
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    Net cash flow from operating activities = $62,200

    Explanation:

    EZ Company

    Statement of Cash Flow

    Particulars Amount ($)

    Net Income 50,000

    Net cash flow from operating activities:

    Depreciation expense 7,000

    Amortization of patent 500

    Amortization of premium on bonds 1,000

    Decrease in accounts receivable 2,000

    Increase in inventory (1,500)

    Decrease in salaries payable (800)

    Increase in accounts payable 4,000

    Net cash used or provided 12,200

    Net cash flow from operating activities = $62,200

    Cash dividend is a financing activities, that is why it is not added or deducted in the operating activities.
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