Question

[The following information applies to the questions displayed below.]

  

Green Brands, Inc. (GBI), presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI’s 2017 and 2016 year-end balance sheets.

  

Account Title	2017			2016
Accounts receivable	$	20,500		$	27,000
Merchandise inventory		57,300			50,600
Prepaid insurance		17,900			25,600
Accounts payable		23,900			19,100
Salaries payable		5,000			3,950
Unearned service revenue		650			2,750

  

The 2017 income statement is shown below:

  

Income Statement
Sales	$	619,000
Cost of goods sold		(376,000	)
Gross margin		243,000
Service revenue		4,400
Insurance expense		(39,000	)
Salaries expense		(140,000	)
Depreciation expense		(6,000	)
Operating income		62,400
Gain on sale of equipment		3,300
Net income	$	65,700
b. Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1