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Splish Brothers Inc. reported net income of $194,800 for 2022. Splish Brothers also reported depreciation expense of $47,700 and a loss of $5,900 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $16,700 for the year, a $18,700 increase in accounts payable, and a $3,000 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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Answer:

Operating activities section of the statement of cash flows for 2022

Net Income                                                          $194,800

Adjustment for non cash items :

Depreciation                                                         $47,700

Loss on disposal                                                    $5,900

Adjustments for changes in working capital :

Increase in accounts receivable                        ($16,700)

Increase in accounts payable                              $3,000

Net Cash Provided by Operating Activities     $234,700

Explanation:

Operating activities section of the statement of cash flows reconciles the Net Income to Operating Cashflow when the indirect method is used as shown above.

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