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Line Item Description 20X1 20X2 Current assets: Accounts receivable $750,000 $582,500 Inventories 300,000 320,000 Current liabilities: Wages payable 700,000 515,000 Davis CompanyIncome StatementFor the Year Ended December 31, 20X2 Line Item Description Amount Amount Revenues $3,000,000 Cost of goods sold 1,920,000 Gross margin $1,080,000 Operating expenses Depreciation 270,000 Operating income $ 810,000 Other revenues and expenses Gain on sale of equipment 100,000 Interest expense 10,000 90,000 Net income $ 900,000 Required: Compute operating cash flows using the indirect method.

Corporate Financial Accounting

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Financial Statement Analysis

Section: Chapter Questions

Problem 14.9BE

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Line Item Description	20X1	20X2
Current assets:
Accounts receivable	$750,000	$582,500
Inventories	300,000	320,000
Current liabilities:
Wages payable	700,000	515,000

Davis CompanyIncome StatementFor the Year Ended December 31, 20X2

Line Item Description	Amount	Amount
Revenues		$3,000,000
Cost of goods sold		1,920,000
Gross margin		$1,080,000
Operating expenses
Depreciation		270,000
Operating income		$ 810,000
Other revenues and expenses
Gain on sale of equipment	100,000
Interest expense	10,000	90,000
Net income		$ 900,000

Required:

Compute operating cash flows using the indirect method.

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