Portions of the financial statements for Hawkeye Company are provided below. Pre
ID: 2488908 • Letter: P
Question
Portions of the financial statements for Hawkeye Company are provided below.
Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Amounts to be deducted should be indicated with a minus sign.)
Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Portions of the financial statements for Hawkeye Company are provided below. HAWKEYE COMPANY Income Statement For the Year Ended December 31, 2013 Sales $ 930 Cost of goods sold (365 ) Gross margin 565 Salaries expense $ 235 Depreciation expense 193 Interest expense 43 Gain on sale of cash equivalents (4 ) (467 ) Income before taxes and extraordinary loss 98 Income tax expense (49 ) Income before extraordinary loss 49 Extraordinary loss (flood damage to inventory) 12 Less: Tax savings (6 ) (6 ) Net Income $ 43 HAWKEYE COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2013 and 2012 Year 2013 2012 Change Cash $218 $203 $15 Accounts receivable 398 427 (29) Inventory 866 853 13 Accounts payable 213 240 (27) Salaries payable 183 194 (11) Interest payable 61 53 8 Income taxes payable 93 110 (17) Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Amounts to be deducted should be indicated with a minus sign.) Direct Method Cash Flows from Operating Activities: (Click to select)Cash paid for income taxesInterest expenseCash paid for interest Cost of goods soldCash received from customersGain on sale of cash equivalentsCash paid to suppliersCash paid to employees $ (Click to select)Cash received from customersCash paid to employeesCash paid to suppliersCash paid for income taxesCash paid for interest Interest expenseGain on sale of cash equivalentsCost of goods sold (Click to select)Cash paid for interest Cash paid to suppliersCash received from customersCost of goods soldGain on sale of cash equivalentsCash paid to employeesCash paid for income taxesInterest expense (Click to select)Cash paid to employeesGain on sale of cash equivalentsCash received from customersCash paid to suppliersInterest expenseCash paid for income taxesCost of goods soldCash paid for interest (Click to select)Gain on sale of cash equivalentsCash received from customersCash paid to suppliersCost of goods soldInterest expenseCash paid to employeesCash paid for income taxesCash paid for interest (Click to select)Cash paid for income taxesCash received from customersInterest expenseGain on sale of cash equivalentsCash paid to suppliersCash paid for interest Cost of goods soldCash paid to employees Net cash flows from operating activities $ 2. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) Indirect Method Cash Flows from Operating Activities: Net income $ Adjustments for noncash effects: (Click to select)Extraordinary gainCost of goods soldInterest expenseSalesSalaries expenseBad debt expenseDepreciation expenseExtraordinary loss (Click to select)Cost of goods soldExtraordinary gainDepreciation expenseSalesExtraordinary lossSalaries expenseInterest expenseBad debt expense Changes in operating assets and liabilities: (Click to select)Decrease in income taxes payableIncrease in interest payableDecrease in accounts receivableDecrease in salaries payableDecrease in accounts payableIncrease in inventory (Click to select)Decrease in accounts payableIncrease in inventoryDecrease in income taxes payableDecrease in salaries payableIncrease in interest payableDecrease in accounts receivable (Click to select)Decrease in inventoryIncrease in accounts payableDecrease in salaries payableIncrease in interest payableDecrease in accounts payableDecrease in income taxes payable (Click to select)Decrease in inventoryIncrease in interest payableDecrease in income taxes payableDecrease in accounts payableDecrease in salaries payableIncrease in accounts payable (Click to select)Decrease in income taxes payableIncrease in accounts payableDecrease in salaries payableDecrease in inventoryIncrease in interest payableDecrease in accounts payable (Click to select)Decrease in accounts payableIncrease in interest payableDecrease in salaries payableDecrease in inventoryDecrease in income taxes payableIncrease in accounts payable Net cash flows from operating activities $
HAWKEYE COMPANYIncome Statement
For the Year Ended December 31, 2013 Sales $ 930 Cost of goods sold (365 ) Gross margin 565 Salaries expense $ 235 Depreciation expense 193 Interest expense 43 Gain on sale of cash equivalents (4 ) (467 ) Income before taxes and extraordinary loss 98 Income tax expense (49 ) Income before extraordinary loss 49 Extraordinary loss (flood damage to inventory) 12 Less: Tax savings (6 ) (6 ) Net Income $ 43
Explanation / Answer
1. Cash flows from operating activities for the year ended December 31, 2013 : Direct Method
T Accounts:
Inventories:
Accounts payable:
2. Cash flows from operating activities for the year ended December 31, 2013: Indirect Method
$ Cash receipts from customers 959 Cash payments for Purchase of inventory 417 Operating expenses 246 663 Cash flows from operations before income taxes 296 Less income taxes paid 66 Cash flows from operating activities 230