Reference no: EM132583909

Presented below is the latest income statement of ABC Ltd.:

Sales............................................................................. $380,000

Cost of goods sold........................................................ 225,000

Gross profit.................................................................... $155,000

Operating expenses...................................................... 85,000

Income before income taxes......................................... 70,000

Income taxes................................................................. 28,000

Net income.................................................................... $ 42,000

In addition, the following information related to net changes in working capital is available:

                                                                                 Debit Credit

Cash.............................................................................. $12,000

Accounts receivable (net)............................................. 8,000

Inventories..................................................................... $19,400

Salaries payable (operating expenses)........................ 6,000

Accounts payable.......................................................... 9,000

Income tax payable....................................................... 3,000

ABC Ltd. also reports that depreciation expense for the year was $13,700 and that the deferred tax liability account increased $2,600.

Instructions

Question 1: Create a schedule calculating the net cash flow from operating activities that would be shown on a statement of cash flows:

a) using the indirect method.

b) using the direct method.