Question - Presented below is the income statement of Cowan, Inc.:
Sales $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 85,000
Income before income taxes 70,000
Income taxes 28,000
Net income $ 42,000
In addition, the following information related to net changes in working capital is presented:
Debit Credit
Cash $12,000
Trade accounts receivable 15,000
Inventories $19,400
Salaries payable (operating expenses) 8,000
Trade accounts payable 12,000
Income tax payable 3,000
The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.
Instructions - Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows:
(a) using the indirect method.
(b) using the direct method.