Questions -

Q1. Glitter Girl, Inc. recognized net income of $150,000 including $26,000 in depreciation expense.

Additional changes from the balance sheet are as follows.

Accounts Receivable $3,500 decrease

Prepaid Expenses $15,000 decrease

Inventory $35,500 increase

Accrued Liabilities $12,000 decrease

Accounts Payable $20,000 increase

Compute the net cash from operating activities based on the above information.

$132,500

$79,000

$205,500

$167,000

Q2. Cash flows from operating activities (indirect and direct methods).

Presented below is the income statement of Smiling Tiger, Inc.

Sales $250,000

Cost of goods sold 109,000

Gross profit $141,000

Operating expenses 85,000

Income before income taxes 56,000

Income taxes 22,400

Net income $33,600

In addition, the following information related to net changes in working capital is presented.

Debit Credit

Cash $10,600

Accounts receivable 2,400

Inventories $3,600

Salaries payable (operating expenses) 12,000

Accounts payable 15,000

Income taxes payable 1,400

Depreciation expense for the year was $14,700

Deferred tax liability account increased $1,800

Required: Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows:

(a) Using the indirect method.

(b) Using the direct method.