1. Kennedy, Inc. reported the following data:
Net income
$118,000
Depreciation expense
15,000
Gain on disposal of equipment
10,000
Increase in accounts receivable
7,000
Paid cash dividends
5,000
Decrease in accounts payable
2,000
Prepare the cash flows for the operating activities under the indirect method as it would appear
on the statement of cash flows.
Net income $118,000
Depreciation expense 15,000
Gain on disposal of equipment 10,000
Increase in accounts receivable 7,000
Paid cash dividends 5,000
Decrease in accounts payable 2,000

2. Solution
Net Cash Flow from Operating Activities, under the indirect method
Net income $118,000
Add/(Less) adjustments:
Depreciation expense 15,000
Loss on disposal of equipment 10,000
Increase in accounts receivable (7,000)
Decrease in accounts payable (2,000)
Net Cash Flow from Operating Activities $134,000