Question

Presented below is the income statement of Cowan, Inc.: Sales revenue $372,700 Cost of goods sold 221,800 Gross profit $150,900 Operating expenses 80,800 Income before income taxes 70,100 Income taxes 26,900 Net income $ 43,200 In addition, the following information related to net changes in working capital is presented: Debit Credit Cash $14,100 Accounts receivable 22,000 Inventories $18,600 Salaries payable (operating expenses) 8,700 Accounts payable 13,700 Income taxes payable 2,700 The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $4,200. Prepare a schedule computing the net cash flow from operating activities by using the indirect method that would be shown on a statement of cash flows.(Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).) Cowan, Inc. Statement of Cash Flows (Partial) (Indirect Method) $ Adjustments to reconcile net income to $ $ Prepare a schedule computing the net cash flow from operating activities by using the direct method that would be shown on a statement of cash flows. Cowan, Inc. Statement of Cash Flows (Partial) Direct Method $ $ $

Answer 1

1-                

                Cowan Inc

       Statement of Cash Flows (Partial)

            (Indirect Method)

Cash flows from Operating Activities  

Net Income                                                                       43200

Adjustment to reconcile

net income to net cash

provided by operating activities:  

Increase in accounts receivable                      (22000)  

Decrease in Inventories                                   18600  

Decrease in salaries payable

(Operating expenses)                                        (8700)        

Increase in accounts payable                            13700  

Decrease in income taxes payable                    (2700)  

Depreciation expense                                       16700  

Increase in deferred tax liability                         4200       19800

Net cash provided by operating activities                       63000

2-

               Cowan Inc

      Statement of Cash Flows (partial)

             (Direct Method)

Cash Flows from Operating Activities:  

Cash Received from Customers (372700-22000)            350700

Cash paid to suppliers (221800-18600-13700)       189500  

Operating Expenses Paid (80800+8700-16700)    72800  

Taxes Paid (26900+2700-4200)                           25400    287700

Net cash provided by operating activities                      63000