Question: The direct versus the indirect method to determine cash flow from operating activities Top Brands, Inc. (TBI), presents its statement of cash flows using the

The direct versus the indirect method to determine cash flow from operating activities Top Brands, Inc. (TBI), presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from TBI's 2012 and 2011 year-end balance sheets.

Account Title 2011 2012 Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Un

The 2012 income statement is shown below:

The direct versus the indirect method to determine cash flow

Required
a. Prepare the operating activities section of the statement of cash flows using the direct method.
b. Prepare the operating activities section of the statement of cash flows using the indirect method.

Account Title 2011 2012 Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue $24,000 $26,000 19,000 23,000 4,600 1,000 24,000 20,000 4,200 2,700

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a Direct Method Reconciliation of Accounts Receivable Beginning balance 26000 Increase due to revenue recognized on account 603000 Decrease due to cas... View full answer

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