Questions -
Q1. Glitter Girl, Inc. recognized net income of $150,000 including $26,000 in depreciation expense.
Additional changes from the balance sheet are as follows.
Accounts Receivable $3,500 decrease
Prepaid Expenses $15,000 decrease
Inventory $35,500 increase
Accrued Liabilities $12,000 decrease
Accounts Payable $20,000 increase
Compute the net cash from operating activities based on the above information.
$132,500
$79,000
$205,500
$167,000
Q2. Cash flows from operating activities (indirect and direct methods).
Presented below is the income statement of Smiling Tiger, Inc.
Sales $250,000
Cost of goods sold 109,000
Gross profit $141,000
Operating expenses 85,000
Income before income taxes 56,000
Income taxes 22,400
Net income $33,600
In addition, the following information related to net changes in working capital is presented.
Debit Credit
Cash $10,600
Accounts receivable 2,400
Inventories $3,600
Salaries payable (operating expenses) 12,000
Accounts payable 15,000
Income taxes payable 1,400
Depreciation expense for the year was $14,700
Deferred tax liability account increased $1,800
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.