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Hello All, I have a query related to the following question-
Durban Township’s Water and Sewer Fund had $40,000 in operating income and a total change in net assets of 150,000. The Water and Sewer Fund also had the following transactions either derived from a comparison of current and prior year Statements of Net Assets or displayed on the current year Statement of Activities:
Increase in current assets other than cash including amounts due from other funds for water services $ 30,000
Increase in current liabilities including the current portion of bonded indebtedness of $25,000 $ 50,000
Depreciation expense $ 70,000
Gain on disposal of fixed assets $ 2,000
Cash flows from operating activities would reconcile to what amount?
a. $105,000
b. $242,000
c. $130,000
d. $107,000
Choice “a” is correct. Cash flows from operating activities would reconcile as follows:
Operating Income $ 40,000
Less: Increases in current assets other than cash (30,000)
Plus: Increases in current liabilities (net of current portion of bonded debt) 25,000
Plus: Depreciation 70,000
Total $ 105,000
Operating income is used to reconcile to cash flows from operations. Non operating income items (such as revolving debt financing and gains on the sale of assets) are excluded from the reconciliation. Interfund receivables for services are considered part of operations.
My question is that why current portion of bonded debt of 25000 excluded in the calculation? The current portion is considered to be a current liability.
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