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Question
Use the following income statement and information about changes in noncash current assets and liabilities to (1) prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method and (2) compute the company's cash flow on total assets ratio for the year assuming that average total assets are $525,250.
DaveyCompany Income Statement
For Year Ended December 31
Sales $880,000
Cost of goodssold 487,000
Gross profit $393,000
Operating expenses:
Salaries expense $144,000
Rent expense 76,000
Depreciation expense 45,000
Amortization expense 22,000
Utilities expenses 12,000 299,000
Income from operations $ 94,000
Loss on sale of equipment 14,000
Income before taxes $ 80,000
Income tax expense 28,500
Net Income $ 51,500
Changes in current asset and current liability accounts for the year that relate to operations follow.
Increase in accounts receivable $ 32,000
Increase in accounts payable (all accounts
payable transactions are for inventory) 13,500
Decrease in prepaid expenses 9,200
Decrease in merchandise inventory 14,000
Decrease in long-term notes payable 20,000
Answer
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