1.
Dorman Company reported the following data:
net income                                 Â
225,000
depreciation expense                   25,000
gain on disposal of equipment       20,500
decrease in accounts receivable     14,000
decrease in account payable            3,600
prepare cash flows from operating actvities section of the statment of cash flows using the
indirect method
Solution
The following is the indirect method formula to calculate net cash flow from operating activities:
Cash Flows from Operating
Activities:
Net Income
+ Non-Cash Expenses:
(Depreciation, Depletion & Amortization Expense)
+ Non-Operating Losses:
(Loss on Sale of Non-Current Assets)
Non-Operating Gains:
(Gain on Sale of Non-Current Assets)
+ Decrease in Current Assets:
(Accounts Receivable, Prepaid Expenses, Inventory etc.)
Increase in Current Assets
+ Increase in Current Liabilities:

2.
(Accounts Payable, Accrued Liabilities, Income Tax
Payable etc.)
Decrease in Current Liabilities
= Net Cash Flow from Operating Activities