The Following Data Is Provided for Penticton Inc for the Year

question 48

Essay

The following data is provided for Penticton Inc for the year ended December 31, 2014.
Income Statement
For the year ended December 31, 2014 $$\begin{array} { l r } \text { Sales } & \$ 525,000 \\\text { Cost of goods sold } & \underline { 375,000 } \\\text { Gross profit } & 150,000 \\\text { Wage expense } & 90,000 \\\text { Amortization expense } & 30,000 \\\text { Gain on sale of land } & \underline { 18,000 } \\\text { Net income } & \underline { \$ 48,000 }\end{array}$$ Additional Information: $$\begin{array} { l r } \text { Increase in accounts receivable } & \$ 17,000 \\\text { Decrease in inventory } & 5,000 \\\text { Increase in account payable } & 12,500 \\\text { Proceeds from sale of land } & 58,000\end{array}$$ Required:
A) Calculate the cash flow from operations for Penticton Inc for the year ended December 31, 2014, using the direct method.
B) Calculate the cash flow from operations for Penticton Inc for the year ended December 31, 2014, using the indirect method.
C) As a potential supplier to Penticton which method would you prefer they use? Support your answer.

• A) Calculate the cash flow from operations for Penticton Inc for the year ended December 31, 2014, using the direct method.
• B) Calculate the cash flow from operations for Penticton Inc for the year ended December 31, 2014, using the indirect method.
• C) As a potential supplier to Penticton which method would you prefer they use? Support your answer.