Question - Cash flows from operating activities (indirect and direct methods). Presented below is the income statement of Smiling Tiger, Inc.
Sales $525,000
Cost of goods sold 260,000
Gross profit $265,000
Operating expenses 106,000
Income before income taxes 159,000
Income taxes 63,600
Net income $95,400
In addition, the following information related to net changes in working capital is presented.
Debit Credit
Cash $10,000
Accounts receivable 15,000
Inventories $36,000
Salaries payable (operating expenses) 15,000
Accounts payable 23,000
Income taxes payable 5,000
Depreciation expense for the year was $23,000
Deferred tax liability account increased $3,400
Required: 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.