Summary Business Accounting

Question:

Net income of Mansfield Company was $45,000. The accounting records reveal depreciation expense of

$80,000 as well as increases in prepaid rent, salaries payable, and income taxes payable of $60,000,

$15,000, and $12,000, respectively. Prepare the cash flows from operating activities section of

Mansfield’s statement of cash flows using the indirect method.



Answer:



Cash flows from operating activities:

Net income $45,000

Adjustments for noncash effects:

Depreciation expense 80,000

Changes in operating assets and liabilities:

Increase in prepaid rent (60,000)

Increase in salaries payable 15,000

Increase in income taxes payable 12,000

Net cash inflows from operating activities $92,000