Problem 1: The income statement of Elbert Company is presented here:
Elbert Company
Income Statement
For the year ended November 30,2007
Sales $ 7,700,000
Cost of goods sold
Beginning inventory $1,900,000
Purchases $4,400,000
Goods available for sale $6,300,000
Ending inventory $1,400,000
Total of goods sold $ 4,900,000
Gross Profit $ 2,800,000
Operating Expenses
Selling expenses $450,000
Administrative Exp. $700,000 $ 1,150,000
Net Income $ 1,650,000
Additional Information:
1) Accounts receivable increased $250,000 during the year and inventory decreased $500,000.
2) Prepaid expenses increased $150,000 during the year.
3) Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4) Accrued expenses payable decreased $100,000 during the year.
5) Administrative expenses include depreciation expense of $90,000.
Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2007, for Ebert Company using the indirect method.
Problem 2: Prepare the operating activities section of the cash flows using the direct method, same year ending