Let's solve the problem step by step using the indirect method for the statement of cash flows (operating activities section): ### 1. **Net Income after Taxes** Already given: **$61,665** --- ### 2. **Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities** #### a) **Depreciation Expense** Given in the income statement: **$49,700** --- #### b) **Changes in Working Capital** - **Increase in Accounts Receivable** - 2023: $87,800 - 2022: $56,000 - **Increase:** $87,800 - $56,000 = **$31,800** (subtract) - **Increase in Inventory** - 2023: $100,900 - 2022: $92,400 - **Increase:** $100,900 - $92,400 = **$8,500** (subtract) - **Increase in Prepaid Expenses** - 2023: $32,900 - 2022: $30,900 - **Increase:** $32,900 - $30,900 = **$2,000** (subtract) - **Decrease in Accounts Payable** - 2023: $18,400 - 2022: $19,800 - **Decrease:** $18,400 - $19,800 = **($1,400)** (subtract) --- #### c) **Gain on Sale of Equipment** - Gain: **$8,200** (subtract because it's a non-cash gain included in net income) --- #### d) **Increase in Income Tax Payable** - 2023: $6,300 - 2022: $5,100 - **Increase:** $6,300 - $5,100 = **$1,200** (add) --- ### 3. **Totals and Format** Let's fill in the cash flow statement: --- #### **THE KERFUFFLE COMPANY** **Statement of Cash Flows (Partial)** **Year Ended June 30, 20X3** | Cash flows from operating activities | Amount ($) | |----------------------------------------------|-----------------| | Net income after taxes | $ 61,665 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | Depreciation expense | $ 49,700 | | Increase in accounts receivable | ($ 31,800) | | Increase in inventory | ($ 8,500) | | Increase in prepaid expenses | ($ 2,000) | | Decrease in accounts payable | ($ 1,400) | | Increase in income tax payable | $ 1,200 | | Gain on sale of equipment | ($ 8,200) | | **Total adjustments** | $ 49,700 - 31,800 - 8,500 - 2,000 - 1,400 + 1,200 - 8,200 =**($1,000)** | | **Net cash provided by operating activities**| **$61,665 + ($1,000) = $60,665** | --- #### **Summary Table** | Adjustments | Amount ($) | |----------------------------------------------|-----------------| | Depreciation expense | $49,700 | | Increase in accounts receivable | ($31,800) | | Increase in inventory | ($8,500) | | Increase in prepaid expenses | ($2,000) | | Decrease in accounts payable | ($1,400) | | Increase in income tax payable | $1,200 | | Gain on sale of equipment | ($8,200) | | **Total adjustments** | **($1,000)** | --- ### **Final Computation** **Net cash provided by operating activities:** **$61,665 (Net Income) + ($1,000) (Total Adjustments) = $60,665** --- Let me know if you need any further breakdown or if you want the full cash flow statement!