Question

The following information is taken from the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.: Collections from customers $28,000
Payments to suppliers for purchases (13,000)
Payments for operating expenses (9,000)
Payments for income taxes (4,000)
Cash provided by operating activities 2,000
The following information is obtained from the income statement of Battery Builders
Net income $4,000
Depreciation expense 4,000
Gain on sale of equipment 2,000
Write-off of intangibles 1,000
In addition, the following information is obtained from the comparative balance sheets of Battery Builders (decreases in parentheses) Change in accounts receivable $3,000
Change in inventory 3,000
Change in accounts payable 2,000
Change in accrued payable (related to operating expense) (2,000)
Change in deferred taxes payable 1,000
Required
1. Prepare a complete accrual-basis income statement for the current year
2. Compute the cash flows from operations using the indirect approach (that is, start with accrual-basis net income and adjust for various items to obtain cash flows from operations)
Prepare a complete accrual-basis income statement for the current year. should be indicated by a minus sigrn Less

Answer 1

Answer:

See below

Explanation:

1. Complete accrual basis income statement

Sales

($28,000 + $3,000)

$31,000

Less cost of goods sold

($13,000 + $2,000 - $3,000)

-$12,000

Operating expenses

($9,000 - $2,000)

-$7,000

Depreciation expenses

-$4,000

Income tax

($4,000 + $1,000)

-$5,000

Amortization expense

-$1,000

Gain on sale of equipment

$2,000

Net income

$4,000

2. Cash flow statement (Indirect)

Net income

$4,000

Adjustments;

Add depreciation

$4,000

Add write off intangibles

$1,000

Less gain on sale of equipment

-$2,000

Less increase in accounts receivables

-$3,000

Less increase in inventory

-$3,000

Add increase in accounts payable

$2,000

Less decrease in accrued payable

-$2,000

Add increase in deferred income tax payable

$1,000

Net cash from operations $2,000