Portions of the financial statements for Parnell Company are provided below: Par
ID: 2446608 • Letter: P
Question
Portions of the financial statements for Parnell Company are provided below:
Parnell Company
Income Statement
For the year ended Dec 31, 2013
($ in 000s)
Sales
$ 800
Cost of Good Sold
(300)
Gross Margin
500
Salaries Expense
$120
Insurance Expense
40
Depreciation Expense
123
Interest Expense
50
(333)
Gains and losses:
Gain on sale of building
11
Loss on sale of machinery
(12)
Income before tax
166
Income tax expense
(78)
Net Income
88
Parnell Company
Selected Accounts from Comparative Balance Sheets
Dec 31, 2013 and 2012
($ in 000s)
2013
2012
Change
Cash
134
100
34
Accounts Receivable
324
216
108
Inventory
321
425
(104)
Prepaid Insurance
66
88
(22)
Accounts Payable
210
117
93
Salaries payable
102
93
9
Deferred income tax liability
60
52
8
Bond Discount
190
200
(10)
Required:
Prepare the cash flows from operating activities section of the statement of cash flows Parnell Company using the direct method
Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method.
Sales
$ 800
Cost of Good Sold
(300)
Gross Margin
500
Salaries Expense
$120
Insurance Expense
40
Depreciation Expense
123
Interest Expense
50
(333)
Gains and losses:
Gain on sale of building
11
Loss on sale of machinery
(12)
Income before tax
166
Income tax expense
(78)
Net Income
88
Explanation / Answer
Cash Flow from Operating Activities Net Income 88 Add: Depreciation 123 Less: Gain on sale of building -11 Add: Loss on machinery 12 Increase in Accounts Receivable -108 Decrease in Inventory 104 Decrease in prepaid insurance 22 Increase in Accounts Payable 93 Increase in Salary Payable 9 Cash Flow from Operating Activities 332