Gainesville Corporation\'s income statement revealed sales of $700,000; gross pr

Question

Gainesville Corporation's income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "indirect" approach to demonstrate how this amount was calculated. The following additional information is available: Beginning-of-Period Balance End-of-Period Balance Account receivable $70,000 $82,000 Inventory 50,000 41,000 Accounts payable 37,000 44,000 Gainesville Corporation's income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "indirect" approach to demonstrate how this amount was calculated. The following additional information is available: Beginning-of-Period Balance End-of-Period Balance Account receivable $70,000 $82,000 Inventory 50,000 41,000 Accounts payable 37,000 44,000

Explanation / Answer

Particular Amount in $ Gross Profit 300000 Less: selling & admin, expenses 140000 income taxes 45000 net income 115000 Cash Flow Using Indirect Method Particular Amount in $ Net Income 115000 depreciation 10,000 increase in A/R -12000 decrease in inventory 9000 increase in A/P 7000 positive cash flow from operating activities 129,000

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