Question

The net income reported on the income statement for the current year was $330,400. Depreciation recorded on equipment and a building amounted to $105,140 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year	Beginning of Year
Cash	$89,900	$95,010
Accounts receivable (net)	111,940	117,700
Inventories	217,550	209,050
Prepaid expenses	13,290	14,160
Accounts payable (merchandise creditors)	95,060	103,580
Salaries payable	15,590	13,710

Required:

A.	Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
B.	If the direct method had been used, would the net cash flow from operating activities have been the same?

Answer 1

B.

yes, even if we have computed cash flows from operations under direct method we would have get the same answer.

It is because it is just difference in methods.

Direct method is from simple cash flow summary for operating activities and indirect method is from income statement.

And there is no change in format for both financing and investing activities.