Lansing Company’s 2016 income statement and selected balance sheet data (for current assets and current liabilities) at December 31, 2015 and 2016, follow. LANSING COMPANY Income Statement For Year Ended December 31, 2016 Sales revenue $ 63,000 Expenses Cost of goods sold 20,000 Depreciation expense 4,000 Salaries expense 10,000 Rent expense 2,000 Insurance expense 1,800 Interest expense 1,800 Utilities expense 1,100 Net income $ 22,300 LANSING COMPANY Selected Balance Sheet Accounts At December 31 2016 2015 Accounts receivable $ 3,700 $ 3,810 Inventory 850 736 Accounts payable 1,200 1,290 Salaries payable 460 340 Utilities payable 100 60 Prepaid insurance 100 120 Prepaid rent 130 100 Required: Prepare the cash flows from operating activities section only of the company’s 2016 statement of cash flows using the indirect method.

The cash flows from operating activities using indirect method is $26,356.

Explanation:

Lansing Company

Statement of cash flows (extract)

Net income                                                     $22,300

Add: Depreciation expense                               4,000

        Accounts receivable decrease                      110

        Salaries payable increase                             120

        Utilities payable increase                               40

        Prepaid insurance decrease                          20

Deduct: Inventory increase                                   (114)

         Accounts payable decrease                        (90)

         Prepaid rent increase                                   (30)

Net cash flows from operating activities     $26,356

Note that depreciation is a non-cash item, so it was added back. Increase in an asset connotes a cash outflow and vice versa while decrease in a liability connotes cash outflow and vice versa.

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