Cash Flow Statement using both indirect and direct methods
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20. Presented below is the income statement of Gregg, Inc.:
Sales $380,000
Cost of goods sold 225,000
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Gross profit $155,000
Operating expenses 95,000
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Income before income taxes 60,000
Income taxes 24,000
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Net income $ 36,000
In addition, the following information related to net CHANGES in
working capital is presented:
Debit Credit
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Cash $ 12,000
Trade accounts receivable (net) 10,000
Inventories $19,400
Salaries payable (operating expenses) 8,000
Trade accounts payable 9,000
Income tax payable 3,000
The company also indicates that depreciation expense for the year
was $13,700 and that the deferred tax liability account increased
$2,600.
INSTRUCTIONS
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.
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Solution Summary
The solution prepares a cash flow statement using both indirect and direct methods. The expert also prepares a schedule computing the net cash flow from operating activities.
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