The following is the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.:
Collections from customers $28,000
Payments to suppliers for inventory purchases (13,000 )
Payments for operating expenses (9,000 )
Payments for income taxes (2,260 )
Cash provided by operating activities 3,740
The following information is obtained from the income statement of Battery Builders:
Net income $6,740
Depreciation expense 4,000
Gain on sale of equipment 2,000
Write-off of intangibles 1,000
In addition, the following information is obtained from the comparative balance sheets of Battery Builders (decreases in parentheses):
Change in accounts receivable $3,000
Change in inventory 3,000
Change in accounts payable 2,000
Change in accrued payables (related to operating expense) (2,000 )
Change in income taxes payable (1,000 )
Required:
a. Prepare a complete accrual-basis income statement for the current year
b. Compute the cash flows from operations using the indirect approach (that is, start with accrual-basis net income and adjust for various items to obtain cash flows from operations).
Answers: 2
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The following is the operating section of the statement of cash flows (direct method) of Battery Bui...
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