Reference no: EM132960716
resented below is the income statement of Cowan, Inc.:
Sales revenue $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 presented:
Cash $12,000 debit
Accounts receivable 20,000 debit
Inventories $19,400 credit
Salaries payable (operating expenses) 8,000 debit
Accounts payable 14,000 credit
Income taxes payable 3,000 debit
The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.
Cash dividends of $400,000 were declared and paid in 2015.
Problem 1: Prepare a schedule computing 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.