During the year, Hepworth Company earned a net income of$59,225. Beginning and ending balances for the year for selectedaccounts are as follows:

	Account
	Beginning	Ending
Cash	$108,000	$125,600
Accounts receivable	66,600	99,150
Inventory	36,800	52,500
Prepaid expenses	27,200	29,400
Accumulated depreciation	81,900	92,500
Accounts payable	45,300	54,425
Wages payable	26,000	15,100

There were no financing or investing activities for the year.The above balances reflect all of the adjustments needed to adjustnet income to operating cash flows.

Required:

1.	Prepare a schedule of operating cash flows using the indirectmethod.
2.	Suppose that all the data used in Requirement 1 except theending accounts payable and cash balances are not known. Assumealso that you know that the operating cash flow for the year was$20,075. What is the ending balance of accounts payable?
3.	Conceptual Connection: Hepworth has an opportunity to buy someequipment that will significantly increase productivity. Theequipment costs $25,000. Assuming exactly the same data used forRequirement 1, can Hepworth buy the equipment using this year’soperating cash flows?

X

Amount Descriptions

Refer to the list below for the exact wording of an amountdescription within your Statement of Cash Flows.

Amount Descriptions
Decrease in accounts payable
Decrease in accounts receivable
Decrease in inventory
Decrease in wages payable
Depreciation expense
Increase in accounts payable
Increase in accounts receivable
Increase in inventory
Increase in wages payable
Net cash from operating activities
Net income
Net loss

X

Operating Cash Flows - Indirect Method

1. Prepare a schedule of operating cash flows using the indirectmethod. (Note: Use a minus sign to indicate any decreases in cashor cash outflows. Refer to the Amount Descriptions list providedfor the exact wording of the answer choices for text entries.)

Hepworth Company

Schedule of Operating Cash Flows

1	Cash flows from operating activities:
2
3	Add (deduct) adjusting items:
4
5
6
7
8
9
10

Final questions

2. Suppose that all the data used in Requirement 1 except theending accounts payable and cash balances are not known. Assumealso that you know that the operating cash flow for the year was$20,075. What is the ending balance of accounts payable?

3. Conceptual Connection: Hepworth has an opportunity to buysome equipment that will significantly increase productivity. Theequipment costs $25,000. Assuming exactly the same data used forRequirement 1, can Hepworth buy the equipment using this year’soperating cash flows?