The following combined income and retained earnings statement, along with selected balance sheet data, are provided for McDuffi e Company:

Required:
1. Using the indirect method, compute the net cash flows from operations for McDuffi e for 2012.
2. Using the direct method, compute the net cash flows from operations for McDuffi e for 2012.
3. What is the impact of dividends paid on net cash flows from operations?Explain.

Transcribed Image Text:

McDuffie Company Combined Income and Retained Earnings Statement For the Year Ended December 31, 2012 Net sales revenue S105,000 3,000 $108,000 Other revenues Total revenues Expenses: Cost of goods sold Selling and administrative expenses Depreciation expense. Interest expense Total expenses S5,000 15,200 5,400 1,200 76,800 S 31,200 9,360 S 21,840 33,500 S 55,340 4,000 5 51,340 Income before taxes Income taxes Net income. Retained earnings, January 1, 2012. Dividends declared and paid. Retained earnings, December 31, 2012. *Gain on sale of equipment (cost, $8,400; book value, $6,000; sales price $9,000). Beginning of Year End of Year $11,000 18,000 1,100 7,000 1,000 2,500 Accounts receivable (net) S12,300 16,800 950 Inventory. Prepaid expenses. Accounts payable. Interest payable Income taxes payable 7,200 750 2,200