EXERCISE $410$

Cash Flow from Operations LO $7$

A consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary follow:

Palano Company and Subsidiary Consolidated Income Statement for the Year Ended December $31,2020$

Sales $$701,000$

Cost of sales $263,000$

Gross profit $438,000$

Operating expenses:

$$Depreciation expense $$76,000$

$$Selling expenses $122,000$

$$Administrative expenses $85,000283,000$

Consolidated net income $155,000$

Less noncontrolling interest in consolidated net income $38,750$

Controlling interest in consolidated net income $$116,250$

December $31$

$2019$

$2020$

Accounts receivable $$229,000$ $$318,000$

Inventory $194,000234,000$

Prepaid selling expenses $26,00030,000$

Accounts payable $99,00079,000$

Accrued selling expenses $96,00084,000$

Accrued administrative expenses $56,00039,000$

Required:

Prepare the cash flow from operating activities section of a consolidated statement of cash flows assuming use of the:

Direct method.

Indirect method.