Question

BE 4-11 statement of cash flows; direct method

BE 4-13 statement of cash flows; indirect method

Answer 1

BE 4-11

Operating Activities
Cash received from customers	660000
Interest received on notes receivable	12000
Interest paid on notes payable	(18000)
Operating Expenses	(440000)
Cash Flow from operating activities	$214000

Except above activities all other are not operating activities hence not included.

Note: Cash outflow is represented in parenthesis

BE 4-13

Operating Activities
Net Income	45000
Adjustments for
Depreciation	80000
Increase in prepaid rent	(60000)
Increase in salaries payable	15000
Increase in Income Taxes Payable	12000
Cash Flow from operating activities	$92000

Note: Cash outflow is represented in parenthesis.

Depreciation is a non-cash expense and hence will be added back to the net income.

Increase in prepaid rent means that more cash was paid for the rent in advance and hence it will decrease the cash.

Increase in salaries payable and income taxes payable shows that more of theses expenses are retained and cash is not paid therefore, they will be added back to the net income.