Question

The following income statement and information about changes in noncash current assets and current liabilities are reported.

SONAD COMPANY Income Statement For Year Ended December 31, 2017
Sales	\(1,828,000
Cost of goods sold	991,000
Gross profit	837,000
Operating expenses
Salaries expense \)245,535
Depreciation expense 44,200
Rent expense 49,600
Amortization expense—Patents 4,200
Utilities expense 18,125	361,660
	475,340
Gain on sale of equipment	6,200
Net income	\( 481,540

Changes in current asset and current liability accounts for the year that relate to operations follow

Accounts receivable	\)30,500 increase	Accounts payable	$12,500 decrease
Inventory	25,000 increase	Salaries payable	3,500 decrease

Required

Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method.

Short answer

Net cash provided by operating activities is $452,240

Step-by-step solution

Meaning of Operating activities

The main business activities that directly impact the delivery of goods or services are operating activities. Examples include the procedures involved in producing, distributing, marketing, and selling goods and services.

Preparing Cash flow from Operating activities

SONAD COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Ended December 31, 2017
Cash flow from Operating activities
Net Income	$481,540
Adjustment to reconcile net income to net cash provided by operating activities
Income item not affecting the cash
Depreciation expense	44,200
Amortization expense-Patents	4,200
Gain on sale of equipment	(6,200)
Changes in current operating assets and liabilities
Increase in accounts receivables	(30,500)
Increase in inventory	(25,000)
Decrease in accounts payable	(12,500)
Decrease in salaries payable	(3,500)
Net cash provided by operating activities	$452,240