Direct and Indirect Methods The Dauve Company reported the following condensed income statement for 2007:
|
Sales |
$100,000 |
|
|
Cost of goods sold |
58,000 |
|
|
Gross profit |
$42,000 |
|
|
Operating expenses |
||
|
Depreciation expense |
$8,000 |
|
|
Salaries expense |
12,000 |
20,000 |
|
Income before income taxes |
$22,000 |
|
|
Income tax expense |
6,600 |
|
|
Net income |
$15,400 |
During 2007, the following changes occurred in the company’s current assets and current liabilities:
|
Increase (Decrease) |
|
|
Cash |
$3,700 |
|
Accounts receivable |
5,500 |
|
Inventories |
8,900 |
|
Accounts payable (purchases) |
4,600 |
|
Salaries payable |
2,800 |
Required
1. By visual inspection, prepare the net cash flow from operating activities section of the Dauve Company’s 2007 statement of cash flows using the indirect method.
2. By visual inspection, prepare the net cash flow from operating activities section of the Dauve Company’s 2007 statement of cash flows using the direct method.