ACCCHAPTER52 - 5-37(5-10 min.)ORION STRATEGY, INC.Statement...

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Unformatted text preview: 5-37(5-10 min.)ORION STRATEGY, INC.Statement of Cash Flows from Operating ActivitiesFor the Year Ended December 31, 20X6Collections from customers ($470,000 $5,000)$465,000Cash expenses ($285,000 $35,000)250,000Net cash provided by operating activities$215,0005-38(5-10 min.)ORION STRATEGY, INC.Reconciliation of Net Income to Net Cash Provided by Operating ActivitiesFor the Year Ended December 31, 20X6Net income$185,000Add depreciation, which was deducted incomputing net income but does not affect cash35,000Deduct increase in accounts receivable(5,000)Net cash provided by operating activities$215,0005-39(10 min.)1.Sales$880,000Nondepreciation expenses [570,000 100,000](470,000)Depreciation(100,000)Net income$310,000Add back depreciation100,000Net cash provided by operating activities$410,0002.Sales$ 880,000Nondepreciation expenses [570,000 100,000](470,000)Depreciation(300,000)Net income$ 110,000Add back depreciation300,000Net cash provided by operating activities$ 410,000Notice that the additional depreciation did not affect net cash provided by operating activities. The direct method clearly shows this phenomenon:Direct method:Sales for cash$ 880,000Operating expenses in cash(470,000)Net cash provided by operating activities$ 410,0005-40(5-10 min.)a. Financingf.Financingb. Financingg.Operatingc. Operatingh.Operating d. Investingi.Financinge. FinancingBecause net income and depreciation appear in the body of the statement of cash flows, AT&T must use the indirect method for reporting cash flows from operating activities....
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ACCCHAPTER52 - 5-37(5-10 min.)ORION STRATEGY, INC.Statement...

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