Macrosoft Company reports net income of $65,000. The accounting records reveal depreciation expense of $80,000 as well as increases in prepaid rent, accounts payable, and income tax payable of $60,000, $12,000, and $18,000, respectively. Prepare the operating activities section of Macrosoft’s statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

The operating activities section of the cash flows will be $115,000.

Explanation:

The operating section of an indirect cash flows statement indicates the about of money the company brings in from its normal business activities and is usually the first section of the cash flows statement. See below the extract of this section of the cash flows:

Macrosoft Company statement of cash flows (extract)

Net income                                                                       $65,000

Add Depreciation expense                                              $80,000

       Increase in accounts payable                                   $12,000

       Increase Income tax payable                                    $18,000

Less Increase in prepaid rent                                          ($60,000)

Net cash flows from / (used in) investing activities     $115,000

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