Cash Flows from Operating Activities (Indirect and Direct Methods) In Addition, the Following Information Related to Net Changes in Is

question 125

Essay

Cash flows from operating activities (indirect and direct methods).Presented below is the income statement of Cowan, Inc.: $$\begin{array} { l r } \text { Sales revenue } & \$ 380,000 \\\text { Cost of goods sold } & 225,000 \\\text { Gross profit } & \$ 155,000 \\\text { Operating expenses } & 85,000 \\\text { Income before income taxes } & 70,000 \\\text { Income taxes } & 28,000 \\\text { Net income } & \$ 42,000\end{array}$$ In addition, the following information related to net changes in working capital is presented: The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.
InstructionsPrepare 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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Definitions:

French and Indian War

A conflict between France and Great Britain from 1754 to 1763 in North America, part of a larger struggle called the Seven Years' War, involving various Native American tribes.

Deteriorate

To become progressively worse over time.

Colonists

Individuals who settle in a new country or area, often for the purpose of establishing a colony that maintains ties with the parent country.

British

Relating to Great Britain, its people, culture, and history, or pertaining to the United Kingdom as a whole.