Partial balance sheets and additional iformation are listed below for Sowell Company. SOWELL COMPANY Partial Balance Sheets as of December 31 Assets 2011 2010 Cash $40,000 $20,000 Accounts Receivable 70,000 85,000 Inventory 40,000 35,000 Liabilities Accounts Payable $54,000 $62,000 Additional Information: Net income was $88,000. Depreciation expense was $19,000. REQUIRED: Prepare the operating activities section of the statement of cash flows for 2011 using the indirect method. Solution Answer : Cash Flows from operating activities:(Year 2011) Net Income                                                $88,000 Adjustment for non cash items: Depreciation Expense                                 $19,000 Decrease in Account Receivable                  $15000 Increase in Inventory                                   $(5000) Decrease in accounts payable                     $(8000) Net cash flows from operating activities        $109,000 working= $88,000+$19000+$15000-$5000-$8000 = $109,000 .

1. Partial balance sheets and additional iformation are listed below for Sowell Company.
SOWELL COMPANY
Partial Balance Sheets
as of December 31
Assets 2011 2010
Cash $40,000 $20,000
Accounts Receivable 70,000 85,000
Inventory 40,000 35,000
Liabilities
Accounts Payable $54,000 $62,000
Additional Information:
Net income was $88,000.
Depreciation expense was $19,000.
REQUIRED: Prepare the operating activities section of the statement of cash flows for 2011
using the indirect method.
Solution
Answer :
Cash Flows from operating activities:(Year 2011)

2. Net
Income                                    Â
          $88,000
Adjustment for non cash items:
Depreciation
Expense                                $19,000
Decrease in Account Receivable                 $15000
Increase in
Inventory                                 Â
$(5000)
Decrease in accounts payable                    $(8000)
Net cash flows from operating activities       $109,000
working= $88,000+$19000+$15000-$5000-$8000 = $109,000