E136.

Cash flows from operating activitiesindirect method

Net income.................................................................................................
Depreciation expense................................................................................
Accounts receivable increase ...................................................................
Merchandise inventory decrease..............................................................
Salaries payable increase.........................................................................
Net cash provided by operating activities............................................

$12,000
6,000
(5,000)
8,000
500
$21,500

Ex. E13-7

Cash flows from operating activitiesindirect method

Net loss......................................................................................................
Depreciation expense................................................................................
Amortization of copyrights.........................................................................
Accounts receivable decrease .................................................................
Salaries payable increase.........................................................................
Other accrued liabilities decrease.............................................................
Net cash provided by operating activities............................................

($8,000)
7,000
300
12,000
9,000
(4,000)
$16,300

Req. 2
The first reason for the net loss was the depreciation expense. This is a non-cash
expense. Depreciation expense, along with decreased working capital requirements
(current assets - current liabilities), turned the net loss into positive operating cash flow
from operations. The reasons for the difference between net income and cash flow are
important because they help the financial analyst to determine if the trends are sustainable
or whether they represent one-time events.
E1311.
Req. 1
Cash flows from operating activitiesdirect method
Cash collected from customers1
Cash payments to employees2
Cash paid for other expenses3
Net cash provided by operating activities............................................

$62,000
(33,000)
(12,700)
$16,300

1. Cash collected from customers = $50,000 + 12,000 = 62,000 (Total sales + decrease in
account receivable)
2. Cash payments to employees = $42,000 9,000 = 33,000 (salaries expense increase
in salaries payable)

3. Cash paid for other expenses = $7,000 + 1,700 + 4,000= 12,700 (Other
expenses+utilities expense+decrease in other accrued liabilities)