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Indirect method - Norman Co

(Preparation of Operating Activities Section-Indirect Method)

Norman Company's income statement for the year ended December 31, 2010, contained the following condensed information.

Revenue from fees $840,000 cr
Operating expenses (excl. depreciation) $624,000 db
Depreciation expense 60,000 db
Loss on sale of equipment 26,000 db
710,000 cr

Income before taxes 130,000 cr
Income tax expense 40,000 cr

Net income $90,000 cr

Norman's balance sheet contained the following comparative data at December 31.

2010 2009
Accounts receivable $37,000 $59,000
Accounts payable 46,000 31,000
Income taxes payable 4,000 8,500

(Accounts payable pertains to operating expenses.)

Instructions

Complete the operating activities section of the statement of cash flows using the indirect method. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1.)

Attachments

Solution Preview

Indirect method:
Normal Company
Partial Statement of Cash Flows
For the Year Ended Dec 31, 2010

Cash flows from operating activities
Net Income..............................................................$90,000
ADD: ...

Solution Summary

The "rule" for deciding if Net Income should be increased or decreased to get to operating cash flow is given and then used to complete the work.

$2.19