Question

The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

1	Sales		$510,600.00
2	Cost of goods sold		294,400.00
3	Gross profit		$216,200.00
4	Operating expenses:
5	Depreciation expense	$39,000.00
6	Other operating expenses	105,910.00
7	Total operating expenses		144,910.00
8	Income before income tax		$71,290.00
9	Income tax expense		22,690.00
10	Net income		$48,600.00

Changes in the balances of selected accounts from the beginning to the end of the current year are as follows:

	Increase (Decrease)
Accounts receivable (net)	($12,330)
Inventories	4,290
Prepaid expenses	(2,780)
Accounts payable (merchandise creditors)	(8,620)
Accrued expenses payable (operating expenses)	1,050
Income tax payable	(2,520)

Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required.

b. What does the direct method show about a company’s cash flows from operating activities that is not shown using the indirect method?

Answer 1

for formulas and calculations, refer to the image below -