Question

In: Accounting

Presented below is the income statement of Cowan, Inc.:          Sales revenue                      &nbsp

Presented below is the income statement of Cowan, Inc.:

         Sales revenue                                                                        $380,000

         Cost of goods sold                                                                 225,000

         Gross profit                                                                             $155,000

         Operating expenses                                                                   95,000

         Income before income taxes                                                      60,000

         Income taxes                                                                              24,000

         Net income                                                                             $ 36,000

In addition, the following information related to net changes in working capital is presented:

                                                                                                              Debit                  Credit

         Cash                                                                                         $12,000

         Accounts receivable                                                                   25,000

         Inventories                                                                                                              $19,400

         Salaries payable (operating expenses)                                        8,000

         Accounts payable                                                                                                     14,000

         Income taxes payable                                                                  3,000

The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.

Instructions

Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows:

(a)   using the indirect method.

(b)   using the direct method.

Solutions

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