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8 April, 09:47

Pharoah Company reported a net income of $184,850 for 2022. Pharoah Company also reported depreciation expense of $33,700 and a loss of $4,690 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $15,150 for the year, a $15,640 increase in accounts payable, and a $4,030 increase in prepaid expenses.

Prepare the operating activities section of the statement of cash flows for 2022. Use the indirect method.

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  1. 8 April, 11:54
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    Cash Flow from operating activities

    Net Income $184,850

    Add: Non cash expenses

    Depreciation $33,700

    Others Gains or Loss adjustments:

    Add: Loss on the disposal $4,690

    Working Capital adjustments

    Increase in account receivables ($15,150)

    Increase in account payable $15,640

    Increase in Prepaid Expense ($4,030)

    Net Cash flow from operating activities $219,700

    Explanation:

    Operating cash flows are cash inflow and outflow generated from to day to day business activities. All the cash flows needed to operate the business smoothly.

    Operating Cash flows from indirect method is calculated by adding non cash items in net income and any other working capital adjustment to the cash flows.
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