Question

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

HAWKEYE COMPANY Income Statement For the Year Ended December 31, 2018
Sales				$	810
Cost of goods sold					305
Gross margin					505
Operating expenses:
Salaries	$	223
Depreciation		181
Loss on sale of land		10
Total operating expenses					414
Operating income					91
Other income (expense):
Gain on sale of cash equivalents					4
Interest expense					(31	)
Income before tax					64
Income tax expense					32
Net income				$	32

HAWKEYE COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2018 and 2017
	Year
	2018			2017			Change
Cash	$	250		$	219		$	31
Accounts receivable		386			403			(17	)
Inventory		898			869			29
Accounts payable		229			272			(43	)
Salaries payable		189			206			(17	)
Interest payable		73			59			14
Income taxes payable		99			122			(23	)

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.

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

REQ 1

	Cash Flows from Operating Activities: Cash received from customers $827 Cash paid to suppliers Cash paid to employees Cash paid for interest Cash paid for income taxes Net cash flows from operating activities $827

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

REQ 2

	Cash Flows from Operating Activities: Net income Adjustments for noncash effects: Depreciation expense Changes in operating assets and liabilities: Net cash flows from operating activities $0

Answer 1

a. Cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method is as below:

Cash Flows from Operating Activities:	Amount ($)
Cash received from customers	827
Cash paid to suppliers	377
Cash paid to employees	240
Cash paid for interest	17
Cash paid for income taxes	55
Net cash flows from operating activities	138

Working Notes:

1. Cash received from customers = $810 + 403 - 386 = $827

2. Cash paid to suppliers = $305 + $898 - $869 + 272 - 229 = $377

3. Cash paid for salaries = $223 + 206 - 189 = $240

4. Cash paid for interest = $31 + 59 - 73 = $17

5. Cash paid for incoem tax = $32 + 122 - 99 = $55

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

Cash Flows from Operating Activities:	Amount ($)	Amount ($)
Net Income		32
Add: Depreciation	181
Less: gain on sale of investments	-4
Add: Loss on sale of land	10	187
Adjustments for changes in working capital:
Decrease in accounts receivable	17
Increase in inventory	-29
Decrease in accounts payable	-43
Decrease in salaries payable	-17
Increase in interest payable	14
Decrease in income tax payable	-23	-81
Net cash flows from operating activities		138