Chisholm Associates uses the indirect method to prepare the operating activities section of the statement of cash flows.The following accounts and balances were drawn from the company's accounting records:

Net income for the period was $80,000.What is the net cash flows from operating activities?

Question

Chisholm Associates uses the indirect method to prepare the operating activities section of the statement of cash flows.The following accounts and balances were drawn from the company's accounting records:

Net income for the period was $80,000.What is the net cash flows from operating activities?

Quizplus · Accepted Answer

Net cash flow from operating activities = Net income of $80,000 ? Increase in accounts receivable of $20,000 (or $80,000 ? $60,000) + Decrease in prepaid insurance of $7,200 (or $9,200 ? $2,000) + Increase in accounts payable of $3,600 (or $51,600 ? $48,000) ? Decrease in unearned revenue of $5,200 (or $12,800 ? $7,600) = $65,600

Chisholm Associates Uses the Indirect Method to Prepare the Operating