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.