Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method.
Portions of the financial statements for Parnell Company are provided below.
| PARNELL COMPANY | ||||||
| Income Statement | ||||||
| For the Year Ended December 31, 2021 | ||||||
| ($ in thousands) | ||||||
| Revenues and gains: | ||||||
| Sales | $ | 750 | ||||
| Gain on sale of building | 11 | $ | 761 | |||
| Expenses and loss: | ||||||
| Cost of goods sold | $ | 275 | ||||
| Salaries | 115 | |||||
| Insurance | 35 | |||||
| 118 | ||||||
| Interest expense | 45 | |||||
| Loss on sale of equipment | 13 | 601 | ||||
| Income before tax | 160 | |||||
| Income tax expense | 80 | |||||
| Net income | $ | 80 | ||||
| PARNELL COMPANY | |||||||||
| Selected Accounts from Comparative Balance Sheets | |||||||||
| December 31, 2021 and 2020 | |||||||||
| ($ in thousands) | |||||||||
| Year | |||||||||
| 2021 | 2020 | Change | |||||||
| Cash | $ | 129 | $ | 105 | $ | 24 | |||
| Accounts receivable | 319 | 221 | 98 | ||||||
| Inventory | 326 | 420 | (94 | ) | |||||
| Prepaid insurance | 71 | 83 | (12 | ) | |||||
| Accounts payable | 205 | 122 | 83 | ||||||
| Salaries payable | 112 | 98 | 14 | ||||||
| 70 | 57 | 13 | |||||||
| Bond discount | 180 | 205 | (25 | ) | |||||
Required:
1. Prepare the
The cash flow statement is either made on the basis of the direct and indirect method by these methods cash flows are determined.
It has been given that direct method that only operating activities cash flow has to be prepared only.
All the cash inflows and outflows of operating activities are taken into account not on the basis of net income and to make adjustments to it.
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