Presented below is the income statement of Debra, Inc.:Sales revenue $380,000Cost of goods sold 222,000Gross profit $158,000Operating expenses 94,100Income before income taxes 63,900Income taxes 22,900Net income $ 41,000In addition, the following information related to net changes in working capital is presented: Debit CreditCash $11,800 Accounts receivable 24,300 Inventories $19,700Salaries payable (operating expenses) 8,400 Accounts payable 14,100Income taxes payable 3,100 The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,900.Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows:(a) using the indirect method.(b) using the direct method.

The question is based on the concept of Cash flow Statement.

Answered: Presented below is the income statement…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 54P

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Presented below is the income statement of Debra, Inc.:

Sales revenue		$380,000
Cost of goods sold		222,000
Gross profit		$158,000
Operating expenses		94,100
Income before income taxes		63,900
Income taxes		22,900
Net income		$ 41,000

In addition, the following information related to net changes in working capital is presented:

	Debit	Credit
Cash	$11,800
Accounts receivable	24,300
Inventories		$19,700
Salaries payable (operating expenses)	8,400
Accounts payable		14,100
Income taxes payable	3,100

The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,900.

Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows:

(a) using the indirect method.

(b) using the direct method.

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