Based on the Information in the Following Income Statement and Balance

question 168

Essay

Based on the information in the following income statement and balance sheet for Monterey Corporation, determine the cash flows from operating activities using the direct method.
Monterey Corporation Income Statement
For Year Ended December 31, 20X2

$$\begin{array} { | l | l | l | } \hline \text { Sales } & & \$ 504,000 \\\hline \text { Cost of goods sold } & 327,600 & \\\hline \text { Depreciation } & 42,000 & \\\hline \text { Other operating expenses } & 125,500 & ( 495,100 \\\hline \text { Other gains (losses): } & & \\\hline \text { Gain on sgle of equipment } & & 7,200 \\\hline \text { Income before taxes } & & 16,100 \\\hline \text { Income tax expense } & & ( 4,800 \\\hline \text { Net income } & & \$ 11,300 \\\hline & &\end{array}$$

---

Definitions:

Service Organization

A business that provides professional services or expertise to clients, rather than tangible goods.

Period Costs

Expenses that are not directly tied to the production process and are expensed in the period they are incurred, such as sales and administrative expenses.

Production Requirements

The specific inputs and conditions needed for the production process to create goods or services.

Direct Labor Cost

The cost of wages paid to workers directly involved in manufacturing a product or providing a service, excluding indirect labor involved in support roles.