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Gregg, Inc: Prepare net cash flows from operating - indirect and direct methods

20. Presented below is the income statement of Gregg, Inc.:

Sales $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 95,000
Income before income taxes 60,000
Income taxes 24,000
Net income $ 36,000

In addition, the following information related to net CHANGES in
working capital is presented:
Debit Credit
-------- -------
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

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.

Solution Summary

In Excel format, the solutions presents the net cash flows from operating activities in two formats.