The following are the income statement and other data or Tanson dron Specialists, Inc.. Income Statement For the year ended December 31, 2015 Sales
The following are the income statement and other data for Tanson dron Specialists, Inc.
Income Statement For the year ended December 31, 2015
| Sales |
| $520,000 | |
| Cost of goods sold | $230,000 | ||
| Gross margin | $290,000 | ||
| Operating expenses (other than depreciation) | $70,000 |
| |
| Depreciation expense | $30,000 | $100,000 | |
| Net income | $190,000 | ||
Changes in current assets (other than cash) and current liabilities during the year were:
|
| Increase | Decrease | |
| Accounts receivable | $20,000 |
| |
| Merchandise inventory | $30,000 | ||
| Prepaid insurance | $10,000 |
| |
| Accounts payable | $22,000 | ||
| Accrued liabilities payable | $5,000 |
| |
Depreciation was the only noncash item affecting net income.
a. Prepare a working paper to calculate cash flows from operating activities under the direct
method.
b. Prepare the cash flows from operating activities section of the statement of cash flows under
the direct method.
c. Prove that the same cash flows amount is obtained under the indirect method by preparing the
cash flows from operating activities section of the statement of cash flows under the indirect
method. You need not prepare a working paper.
