Molloy Ltd. reported the following for the fiscal year 2021:

Additional information:

1. Accounts receivable decreased by $15,000 during the year.

2. Inventory increased by $7,000 during the year.

3. Prepaid expenses decreased by $5,000 during the year.

4. Accounts payable to suppliers increased by $10,000 during the year.

5. Accrued expenses payable increased by $4,000 during the year.

6. Income tax payable decreased by $6,000 during the year.

Instructions

Prepare the operating activities section of the cash fl ow statement using either

(a) The indirect method or

(b) the direct method, as assigned by your instructor.

Taking It Further

In what circumstances will the direct method result in a different amount of cash provided (used) by operations than the indirect method?

Transcribed Image Text:

MOLLOY LTD. Income Statement Year Ended September 30, 2021 Sales $580,000 Cost of goods sold Gross profit Operating expenses Depreciation expense Gain on sale of land 340,000 240,000 $ 96,000 25,000 (35,000) 86,000 Profit before income tax 154,000 Income tax expense 38,000 Profit $116,000