Problem 16-1

Prepare working paper to convert income statement to cash basis; prepare cash flows from operating activities under both methods (L.O. 2, 3)

The income statement and other data of Dunbar Carpet Outlet, Inc., follow:

Changes in current assets (other than cash) and current liabilities during the year were:

	Increase	Decrease
Accounts receivable		$20,000
Merchandise inventory	$16,000
Prepaid insurance	8,000
Accounts payable	28,000
Accrued liabilities payable	4,000	b. Prepare the cash flows from operating activities section of the statement of cash flows under the direct method.