Ripley Corporation’s accumulated depreciation—equipment account increased by $15,325 while $3,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $22,420 from the sale of investments.

Question

Reconcile a net income of $286,900 to net cash flows from operating activities.
fill in the blank 1 of 1$

Answer 1

To reconcile net income to net cash flows from operating activities, we need to adjust the net income by adding back non-cash expenses and deducting non-cash gains or losses.

Given:

1. Net Income: $286,900
2. Accumulated Depreciation Increase: $15,325 (this is a non-cash expense, so it is added back)
3. Patent Amortization: $3,800 (this is also a non-cash expense, so it is added back)
4. Gain from sale of investments: $22,420 (this is a non-cash gain, so it is deducted)

Now we can reconcile:

\[ \text{Net Cash Flow from Operating Activities} = \text{Net Income} + \text{Increase in Accumulated Depreciation} + \text{Patent Amortization} - \text{Gain on Sale of Investments} \]

Substituting in the values:

\[ \text{Net Cash Flow from Operating Activities} = 286,900 + 15,325 + 3,800 - 22,420 \]

Calculating:

1. Add the non-cash expenses:

   • \( 286,900 + 15,325 = 302,225 \)
   • \( 302,225 + 3,800 = 306,025 \)

2. Subtract the gain on the sale of investments:

   • \( 306,025 - 22,420 = 283,605 \)

Thus, the net cash flows from operating activities would be $283,605.

Therefore, the final answer filled in the blank is:

$283,605