1.
Gregson Company had the following noncash current asset and current liabilities balances at the
end of 2010 and 2011:
2010
2011
Accounts receivable
$ 60,000
$ 68,000
Inventory
230,000
210,000
Prepaid insurance
15,000
13,000
Accounts payable
20,000
30,000
Net income for 2011 was $750,000 and depreciation expense was $40,000. All sales and all
purchases are on account. Gregson uses the indirect method for preparing the statement of cash
flows.
Net cash flows from operating activities for 2011 would be:
2010 2011
Accounts receivable $ 60,000 $ 68,000
Inventory 230,000 210,000
Prepaid insurance 15,000 13,000
Accounts payable 20,000 30,000

2.
Solution
Hi,
Please find the detailed answer as follows:
Answer is $814000
Thanks.
Cash Flow from Operating Activities
Net Income 750000
Add Depreciation 40000
Add Decrease in Inventory 20000
Increase in Accounts Payable 10000
Decrease in Prepaid Insurance 2000
Less Increase in Accounts Receivables -8000
Net Cash Flows from Operating Activities for 2011 814000