6. (TCO F) Cash flows from operating activities (indirect and direct methods).
Presented below is the income statement of Smiling Tiger, Inc.
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Sales |
$1,020,000 |
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Cost of goods sold |
640,000 |
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Gross profit |
$380,000 |
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Operating expenses |
230,000 |
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Income before income taxes |
150,000 |
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Income taxes |
60,000 |
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Net income |
$90,000 |
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In addition, the following information related to net changes in working capital is presented. |
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Debit |
Credit |
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Cash |
$50,000 |
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Accounts receivable |
34,500 |
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Inventories |
$25,000 |
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Salaries payable (operating expenses) |
60,000 |
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Accounts payable |
450,000 |
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Income taxes payable |
12,000 |
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Depreciation expense for the year was $54,000 |
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Deferred tax liability account increased $6,500 |
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Required: |
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Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows: |
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(a) |
using the indirect method. |
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(b) |
using the direct method. |
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