The following are the income statement and other data or Tanson dron Specialists, Inc.. Income Statement For the year ended December 31, 2015 Sales
The following are the income statement and other data or Tanson dron Specialists, Inc..
Income Statement For the year ended December 31, 2015
Sales $520,000
Cost of goods sold $230,000
Gross margin $290,000
Operating expenses (other than depreciation) $70,000
Depreciation expense $30,000
$100,000
Net income $190,000
Changes in current assets (other than cash) and current liabilities during the year were:
Increase Decrease
Accounts receivable $20,000
Merchandise inventory $30,000
Prepaid insurance $10,000
Accounts payable $22,000
Accrued liabilities payable $5,000
Depreciation was the only noncash item affecting net income.
a. Prepare a working paper to calculate cash flows from operating activities under the direct
method.
b. Prepare the cash flows from operating activities section of the statement of cash flows under
the direct method.
c. Prove that the same cash flows amount is obtained under the indirect method by preparing the
cash flows from operating activities section of the statement of cash flows under the indirect
method. You need not prepare a working paper.