Determining Operating Cash FlowsDirect Method

Adjusted trial balances for Garboz Company, an industrial recycler, at December 31, 2020, and 2019, follow.

Debits, December 31 2020 2019

Cash . . . . . . . . . . . . . . . . . . . . . . . $ 35,000 $ 32,000

Accounts receivable . . . . . . . . . . . 33,000 30,000

Inventory. . . . . . . . . . . . . . . . . . . . 31,000 47,000

Property, plant, and equipment. . . 100,000 95,000

Discount on bonds payable . . . . . 4,500 5,000

Cost of goods sold . . . . . . . . . . . . 250,000 380,000

Selling expenses . . . . . . . . . . . . . 141,500 172,000

General and administrative

expenses. . . . . . . . . . . . . . . . . . 137,000 151,300

Interest expense. . . . . . . . . . . . . . 4,300 2,600

Income tax expense . . . . . . . . . . . 20,400

61,200

Total debits . . . . . . . . . . . . . . . . . $756,700 $976,100

Credits, December 31 2020 2019

Allowance for doubtful accounts. . . $ 1,300 $ 1,100

Accumulated depreciation . . . . . . . 16,500 15,000

Trade accounts payable . . . . . . . . . 25,000 17,500

Income taxes payable. . . . . . . . . . . 21,000 27,100

Deferred income tax liability . . . . . . 5,300 4,600

Callable bonds payable, 8%. . . . . . 45,000 20,000

Common stock . . . . . . . . . . . . . . . . 50,000 40,000

Additional paidin capital. . . . . . . . . 9,100 7,500

Retained earnings . . . . . . . . . . . . . 44,700 64,600

Sales. . . . . . . . . . . . . . . . . . . . . . . . 538,800 778,700

Total credits . . . . . . . . . . . . . . . . . $756,700 $976,100

Additional information

1. Purchased $5,000 of equipment in 2020.

2. Allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.

3. Assume no accounts receivable were written off or recovered during the year.