The following is the operating section of the statement of cash flows (direct method) of Battery Builders,
Question:
The following is the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.:
Collections from customers | $ 28,000 |
Payments to suppliers for inventory purchases | (13,000) |
Payments for operating expenses | (9,000) |
Payments for income taxes | (2,260) |
Cash provided by operating activities | 3,740 |
The following information is obtained from the income statement of Battery Builders:
Net income …………………….. $ 6,740
Depreciation expense ……………. 4,000
In addition, the following information is obtained from the comparative balance sheets of Battery Builders (decreases in parentheses):
Change in accounts receivable | $ 3,000 |
Change in inventory | 3,000 |
Change in accounts payable | 2,000 |
Change in accrued payables (related to operating expense) | (2,000) |
Change in income taxes payable | (1,000) |
Required:
1. Prepare a complete accrual-basis income statement for the current year.
2. Compute the cash flows from operations using the indirect approach (that is, start with accrual-basis net income and adjust for various items to obtain cash flows from operations).
Step by Step Answer:
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer