Need help with: Net Income and cost of goods sold The following schedule relates

Question

Need help with: Net Income and cost of goods sold

The following schedule relates the income statement with cash flows from operating activities, derived by both the direct and indirect methods. Some elements necessary to complete the schedule are missing Required Complete the schedule by determining each of the following missing elements: (Amounts to be deducted should be indicated with a minus sign.) Cash flows from Operating Activities Income Statement Indirect Method Direct Method Net income Adjustments $ 306 6 Cash received from customers (24) (Not reported-no cash effect) (12) Sales S 300 Decrease in accounts receivable Gain on sale of equipment 24 Gain on sale of equipment Increase in inventory Cost of goods sold Salaries expense Depreciation expense Interest expense Insurance expense Loss on sale of land Income tax expense Net Income 18 Cash paid to suppliers 6 Cash paid to employees 9 Cash paid for depreciation 3 Cash paid for interest 9 Cash paid for insurance 6 (Not reported-no cash effect) 6 Cash paid for income taxes Increase in accounts payable (174) (42) Increase in salaries payable (9) Depreciation expense (12) Decrease in bond discount (21) Decrease in prepaid insurance (12) (6) Loss on sale of land (27) Increase in income tax payable 207 Net cash flows from operating activities (21) $ 54 S S 54 Net cash flows from operating activities

Explanation / Answer

Cost of the ggods sold: This comprise only the costs of purchase,costs of conversion and other costs that are incurred in bringing the inventories to their present location and condition. So, in the present question only Salaries and Depreciation forms part of the cost of the goods sold.

So, cost of the goods sold = Salaries expense + Depreciation Expense = 42+9 = ($51)

Net income : For calculating cash flows from operating activities under indirect method, we take net income as net income before taxes.

So, Net income = Net income + Income tax expense = 207 + 27 = 234

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.