Question

In: Accounting

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

Solutions

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.


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