The following account balances are for the noncash current assets and current liabilities of Wynn Bicycle Co. at the end of 2011 & 2012.
2011 2012
Accounts receivable 4,000 6,000
Inventory 30,000 20,000
Office supplies 5,000 8,000
Accounts payable 10,000 7,000
Salaries & wages payable 2,500 4,000
Interest payable 1,500 2,500
Income taxes payable 5,500 2,500
In addition, the income statement for 2012 is as follows:
Sales revenue 110,000
Cost of goods sold 85,000
Gross profit 25,000
General & administrative expense 9,000
Depreciation expense 2,000
Income before interest & taxes 14,000
Interest expense 2,000
Income before tax 12,000
Income tax expense 4,800
Net income 7,200
i) Create operating activities section of statement of cash flows, by using indirect method.
ii) What use of direct method reveals about the company which indirect method does not?