The cash flows from operating activities under indirect method.

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Chapter 11, Problem 11.29BE

To determine

To prepare: The cash flows from operating activities under indirect method.

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Total cash inflow in the operating section of the statementof cash flows should include which of the following?a. Cash received from customers at the point of sale.b. Cash collections from customer accounts receivable.c. Cash received in advance of revenue recognition(unearned revenue).d. All of the above.

Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets: Account Title Year 2 Year 1 $52,000 72,000 32,000 28,000 Accounts receivable $48,000 78,000 24,000 31,000 Merchandise inventory Prepaid insurance Accounts payable Salaries payable 8,200 7,800 Unearned service revenue 2,400 3,600 The Year 2 income statement is shown below: Income Statement $ 720,000 (398,000) 322,000 6,000 (36,000) (195,000) (12,000) 85,000 4,500 Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income 89,500 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method.

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