Alabama Auto Parts Company uses the indirect method to prepare the statement of cash flows. Refer to the following income​ statement:

To prepare the operating activities section of the statement of cash flows using the indirect method, we start with the net income and then adjust for non-cash items and changes in working capital.

Here’s how to prepare the operating activities section:

1. Start with Net Income: \[ Net Income: \quad 109,550 \]

2. Add back non-cash expenses:

   • Depreciation Expense: \($18,600\)

3. Adjust for gains/losses that are included in net income but do not involve cash:

   • Subtract Gain on Sale of Plant Assets: \(-6,800\)

4. Adjust for changes in working capital accounts:

   • Current Assets (Other than Cash): Increase of $30,000 (which means cash outflow): \(-30,000\)
   • Current Liabilities: Decrease of $3,500 (which means cash outflow): \(-3,500\)

Now we can compile these into the operating activities section:

Alabama Auto Parts Company

Statement of Cash Flows (Operating Activities)

For the Year Ended December 31, 2024

| Cash Flows from Operating Activities | |------------------------------------------------------| | Net Income | $109,550 | | Adjustments to Reconcile Net Income to Net Cash | | | Provided by Operating Activities | | | Depreciation Expense | $18,600 | | Gain on Sale of Plant Assets | \(-6,800\) | | Changes in Working Capital: | | | Increase in Current Assets (other than cash) | \(-30,000\) | | Decrease in Current Liabilities | \(-3,500\) | | Net Cash Provided by Operating Activities | |

Calculation of Net Cash Provided by Operating Activities

Now let's calculate it:

\[ Net Cash Provided by Operating Activities = Net Income + Depreciation Expense - Gain on Sale of Plant Assets - Increase in Current Assets - Decrease in Current Liabilities \] \[ = 109,550 + 18,600 - 6,800 - 30,000 - 3,500 \] \[ = 109,550 + 18,600 - 6,800 - 30,000 - 3,500 = 87,850 \]

Final Operating Activities Section

Now, here’s the completed table:

Alabama Auto Parts Company

Statement of Cash Flows (Operating Activities)

For the Year Ended December 31, 2024

| Cash Flows from Operating Activities | |------------------------------------------------------| | Net Income | $109,550 | | Adjustments to Reconcile Net Income to Net Cash | | | Provided by Operating Activities | | | Depreciation Expense | $18,600 | | Gain on Sale of Plant Assets | \(-6,800\) | | Changes in Working Capital: | | | Increase in Current Assets (other than cash) | \(-30,000\) | | Decrease in Current Liabilities | \(-3,500\) | | Net Cash Provided by Operating Activities | $87,850 |

This operating activities section summarizes the cash flows from operating activities utilizing the adjustments needed for the indirect method.