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:

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 directmethod.

Transcribed Image Text:

Debit S12,000 15,000 Credit Cash Trade accounts receivable Inventories Salaries payable (operating expenses) Trade accounts payable Income tax payable $19,400 8.000 12,000 3,000