Question

The following schedule relates the income statement with cash flows from operating activities, derived by both the direct and indirect methods. The amounts for income statement elements are missing.

Cash Flows from Operating Activities
Income Statement				Indirect Method				Direct Method
				Net income	$	?
				Adjustments:
Sales	$	?		Decrease in accounts receivable		10		Cash received from customers	$	600
Cost of goods sold		?		Increase in inventory		(20	)
				Decrease in accounts payable		(33	)	Cash paid to suppliers		(407	)
Salaries expense		?		Increase in salaries payable		11		Cash paid to employees		(36	)
Depreciation expense		?		Depreciation expense		17		(Not reported—no cash effect)
Insurance expense		?		Decrease in prepaid insurance		18		Cash paid for insurance		(14	)
Loss on sale of land		?		Loss on sale of land		14		(Not reported—no cash effect)
Income tax expense		?		Increase in income tax payable		14		Cash paid for income taxes		(34	)
Net income	$	?		Net cash flows from operating activities	$	109		Net cash flows from operating activities	$	109

Required:
Deduce the missing amounts and prepare the income statement.

Answer 1

Income Statement
Sales	$             590	=600-10
Cost of Goods Sold	$             354	=407-33-20
Salaries Expense	$               47	=36+11
Depreciation Expense	$               17
Insurance Expense	$               32	=14+18
Loss on sale of land	$               14
Income tax expense	$               48	=34+14
Net Income	$               78