Required: Cash Flows from Operating Activities Income Statement Indirect Method

Question

Required:

Cash Flows from Operating Activities   Income Statement Indirect Method Direct Method Net income $ ? Adjustments:   Sales $ ? Decrease in accounts receivable 11 Cash received from customers $ 611   Cost of goods sold ? Increase in inventory (22 ) Decrease in accounts payable (35 ) Cash paid to suppliers (417 )   Salaries expense ? Increase in salaries payable 12 Cash paid to employees (37 )   Depreciation expense ? Depreciation expense 18 (Not reported—no cash effect)   Insurance expense ? Decrease in prepaid insurance 19 Cash paid for insurance (15 )   Loss on sale of land ? Loss on sale of land 15 (Not reported—no cash effect)   Income tax expense ? Increase in income tax payable 15 Cash paid for income taxes (35 )   Net income $ ? Net cash flows from operating activities $ 107 Net cash flows from operating activities $ 107

Required:

Deduce the missing amounts and prepare the income statement. ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **

Explanation / Answer

Ans-

Cash Flows from Operating Activities   Income Statement Indirect Method Direct Method Net income $ 74 Adjustments:   Sales $ 611 Decrease in accounts receivable 11 Cash received from customers $ 611   Cost of goods sold -417 Increase in inventory -22 Decrease in accounts payable -35 Cash paid to suppliers -417   Salaries expense -37 Increase in salaries payable 12 Cash paid to employees -37   Depreciation expense -18 Depreciation expense 18 (Not reported—no cash effect)   Insurance expense -15 Decrease in prepaid insurance 19 Cash paid for insurance -15   Loss on sale of land -15 Loss on sale of land 15 (Not reported—no cash effect)   Income tax expense -35 Increase in income tax payable 15 Cash paid for income taxes -35   Net income $ 74 Net cash flows from operating activities $ 107 Net cash flows from operating activities $ 107

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