Portions of the financial statements for Hawkeye Company are provided below. Pre
ID: 2488976 • 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.)
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
Explanation / Answer
Cash received from customers
959
Less:
Cash paid to suppliers
405
Cash paid for salaries
246
Cash paid for interest expense
41
Cash paid for income tax
60
Cash from operating activities
207
Indirect method of cash flow
Net income
43
Add: Depreciation expense
193
Loss – extraordinary net of tax
6
Interest payable increase
8
Increase in account receivable
29
Less: increase in inventory
-13
Decrease in accounts payable
-27
Increase in salaries payable
-11
Decrease in income tax payable
-17
Cash for operating activities
207
Cash received from customers
959
Less:
Cash paid to suppliers
405
Cash paid for salaries
246
Cash paid for interest expense
41
Cash paid for income tax
60
Cash from operating activities
207