Question

Portions of the financial statements for Hawkeye Company are provided below. 

 

 

Required: 

1. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. 

2. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method.

Answer 1

1.

HAWKEYE COMPANY
Cash Flow Statement (Direct Method)
Cash flows from operating activities
Cash received from customers	$ 926		900+26
Cash paid to suppliers	$ (384)		350+24+10
Cash paid for salaries	$ (240)		232+8
Cash paid for interest expense	$ (35)		40-5
Cash paid for income tax expense	$ (54)		40+14
Net cash provided by operating activities		$ 213

 

2.

HAWKEYE COMPANY
Cash Flow Statement (Indirect Method)
Cash flows from operating activities
Net Income		$ 40
Adjustments for noncash effects
Depreciation expense	$ 190
Inventory loss from water damage	$ 12
Gain on sale of cash equivalents	$ (4)
Changes in operating assets and liabilities
Decrease in Accounts Receiveble	$ 26
Increase in Inventory	$ (10)
Decrease in Accounts Payable	$ (24)
Decrease in Salaries Payable	$ (8)
Increase in Interest Payable	$ 5
Decrease in Income tax Payable	$ (14)
		$ 173
Net cash provided by operating activities		$ 213

1.

HAWKEYE COMPANY
Cash Flow Statement (Direct Method)