Question

Salud Company reports the following information. Use the indirect method to prepare only the operating activities section of its statement of cash flows for the year ended December 31, 2017.

Selected 2017 Income Statement Data		Selected Year-End 2017 Balance Sheet Data
Net income	\(400,000	Accounts receivable increase	\)40,000
Depreciation expense	80,000	Prepaid expenses decrease	12,000
Gain on sale of machinery	20,000	Accounts payable increase	6,000
		Wages payable decrease	2,000

Short answer

Net cash provided by operating activities is $436,000

Step-by-step solution

Meaning of Operating activities

Operating activities are the primary business activities that directly impact the delivery of goods or services. Some examples are the processes involved in creating, distributing, marketing, and selling goods and services.

Preparing operating activities

Salud Company
Statement of Cash Flows—Operating Section under Indirect Method
For Year Ended December 31, 2017
Cash flow from Operating activities
Net Income	$400,000
Adjustment to reconcile net income to net cash provided by operating activities
Income item not affecting the cash
Depreciation expense	80,000
Gain on sale of machinery	(20,000)
Changes in current operating assets and liabilities
Accounts receivables increase	(40,000)
Prepaid expenses decrease	12,000
Accounts payable increase	6,000
Wages payable decrease	(2,000)
Net cash provided by operating activities	$436,000