Question

Blue Company’s income statement for the year ended December 31, 2017, contained the following condensed information.

Service revenue				$846,000
Operating expenses (excluding depreciation)		$630,000
Depreciation expense		61,000
Loss on sale of equipment		27,000		718,000
Income before income taxes				128,000
Income tax expense				40,000
Net income				$88,000

Blue’s balance sheet contained the following comparative data at December 31.

		2017		2016
Accounts receivable		$35,000		$57,000
Accounts payable		42,000		30,000
Income taxes payable		3,900		8,700

(Accounts payable pertains to operating expenses.)

Prepare the operating activities section of the statement of cash flows using the indirect method.

Answer 1

Cash flow from operating activities
Net income		88000
Adjustment to reconcile net income to net cash flow from operating activities
Depreciation expense	61000
Loss on sale of equipment	27000
Changes in Current assets and liabilities
Decrease account receivable	22000
Increase account payable	12000
Decrease income tax payable	-4800
		117200
Net cash flow from operating activities		205200