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Topic
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Lino Co.’s worksheet for the preparation of its Year 2 statement of cash flows included the following:
December 31 January 1
Accounts receivable $ 29,000 $ 23,000
Allowance for uncollectible accounts 1,000 800
Prepaid rent expense 8,200 12,400
Accounts payable 22,400 19,400
Lino’s Year 2 net income is $150,000. What amount should Lino include as net cash provided by operating activities in the statement of cash flows?
Choice “c” is correct. $151,400 net cash provided by operating activities, as follows:
Net income $ 150,000
Increase in A/R (6,000)
Increase in allowance 200
Decrease in prepaid 4,200
Increase in A/P 3,000
$ 151,400
*So this chapter is really getting the best of me (Becker F7). I have no idea when to add or when to subtract operating assets and liablilities. I feel that whenever I read the chapters in Becker, I grasp the material, but when it comes to do the problems I end up doing the damn opposite of what I just learned…..
Becker clearly states that the Cash Flows From Operations = Net Income + Noncash Expenses – Noncash Income + Increase in Operating Liabilities – Increases in Operating Assets.
The $6,000 decrease in A/R in my eyes is a decrease in operating assets, and therefore should be added. ( If we subtract increases, add decreases, correct…?) So why is it being subtracted in this problem? I thought the answer would be $148,600.
So discouraging when you spend hours learning material and the basic concepts still don’t make any sense.
FAR - Passed! 8/23/13 (Becker Self Study and Ninja Audio)
REG - Passed! 7/24/13 (Becker Self Study and Ninja Audio)
AUD - Passed! 8/25/14 (Becker Self Study and Ninja Audio)
BEC - Passed! 11/23/14(Becker Self Study and Ninja Audio)Now Gimme my Bonus!!!
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