Merry Maids CompanyMerry Maids Company began 2019 with a cash and cash equivalents balance of $7,670. Consolidated statements of cash flows for the years ended December 31, 2020 and 2019, are presented below:
(in thousands)2020
2019
Operating Activities: Net income$6,300
$6,000
Adjustments to reconcile net income to net cash provided by operating activities: Depreciation4,500
4,020
Amortization of software520
980
Effect of restructuring charges(350)
(440)
Deferred income taxes(600)
360
Gain on the disposal of fixed assets and other assets(260)
(270)
Changes in assets and liabilities (net of businesses acquired) Accounts receivable(2,740)
(3,730)
Inventories75
430
Other assets880
(1,090)
Accounts payable and accrued liabilities362
700
Other liabilities 595
1,815
Net cash provided by operating activities$9,282
$8,775
Net cash used by investing activities($6,131)
($6,155)
Net cash provided by financing activities($4,993)
($3,090)
Cash and cash equivalents at end of year$5,358
$7,200
Refer to Merry Maids Company. Describe the link(s) between a statement of cash flows, the balance sheet, and the income statement if a company uses the indirect method to prepare the operating activities section of the statement of cash flows.
What will be an ideal response?
The net increase or decrease on the statement of cash flows is linked to the change in the cash balance from one year to the next on comparative balance sheets. Under the indirect method, net income (loss) from the income statement is the starting point for the determination of net cash flow from operating activities on the statement of cash flows.
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