Freeport Company's income statement for last year is as follows: Income Statement Sales $300,000 Less: Cost...

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

Expert Solution

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.

ekkarill92 answered 2 years ago

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