In: Accounting
Freeport Company's income statement for last year is as follows:
Income Statement | |
Sales | $300,000 |
Less: Cost of goods sold | 200,000 |
Gross margin | 100,000 |
Less: Operating expenses | 60,000 |
Income before taxes | 40,000 |
Less: Income taxes | 16,000 |
Net income | $24,000 |
The beginning and ending balances for last year are available for the following accounts:
Ending balance |
Beginning balance |
||
Accounts receivable | $32,000 | $40,000 | |
Inventory | 60,000 | 50,000 | |
Prepaid expenses | 12,000 | 8,000 | |
Accumulated depreciation | (40,000) | (30,000) | |
Accounts payable | 30,000 | 45,000 | |
Accrued liabilities | 16,000 | 10,000 | |
Income taxes payable | 2,000 | 5,000 |
Required:
Using the direct method, prepare the operating activities section of the statement of cash flows. Amounts to be deducted should be indicated by a minus sign.
Freeport Company | ||
Operating Activities Section | ||
$ | ||
Adjustments for conversion to cash basis: | ||
$ | ||
Adjustments for conversion to cash basis: | ||
Adjustments for conversion to cash basis: | ||
Adjustments for conversion to cash basis: | ||
Net cash flows from operating activities |
Note: Accrued liabilities exist only in accrual method of accounting.Depreciation expense is a non cash expense so it is not computed in cash flows under direct method.