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ID: 2481806 • Letter: W
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Cowan, Inc.
Statement of Cash Flows (Partial)
(Indirect Method)
Adjustments to reconcile net income to
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Cowan, Inc.
Statement of Cash Flows (Partial)
Direct Method
Sales revenue $372,800 Cost of goods sold 225,500 Gross profit $147,300 Operating expenses 85,900 Income before income taxes 61,400 Income taxes 26,900 Net income $ 34,500
In addition, the following information related to net changes in working capital is presented:
Debit Credit Cash $11,700 Accounts receivable 20,500 Inventories $20,600 Salaries payable (operating expenses) 9,100 Accounts payable 14,600 Income taxes payable 2,200
The company also indicates that depreciation expense for the year was $17,500 and that the deferred tax liability account increased $2,200.
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Explanation / Answer
Cash flow statement from operating activities Net Income 34500 Add : depriciation 17500 Add : Increase in deferred tax liability 2200 Add : decrease in inventories 20600 Less : Increase in accounts receivable 20500 Add : Increase in accounts payable 14600 Less : Decrease in salaries payable 9100 Less : Decrease in income tax payable 2200 Net cash flow from operating activities 57600
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