50.1K

Verified Solution

Link Copied!

Presented below is the latest income statement of Oxford Ltd:

Sales-------------------------------------------------------------------------------------------------------------- $380,000

Cost of goods sold-------------------------------------------------------------------------------------------- 225,000

Gross profit----------------------------------------------------------------------------------------------------- $155,000

Operating expenses-------------------------------------------------------------------------------------------- 85,000

Income before income taxes------------------------------------------------------------------------------- 70,000

Income taxes------------------------------------------------------------------------------------------------------ 28,000

Net income------------------------------------------------------------------------------------------------------- $42,000

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

Debit Credit

Cash---------------------------------------------------------------------------------------- $12,000

Accounts receivable (net)-------------------------------------------------------------- 8,000

Inventories------------------------------------------------------------------------------------------- $19,400

Salaries payable (operating expenses)------------------------------------------ 6,000

Accounts payable--------------------------------------------------------------------------------- 9,000

Income tax payable---------------------------------------------------------------------- 3,000

Oxford Ltd also reports that depreciation expense for the year was $13,700 and that the future income tax liability account increased $2,600.

Required:

Prepare a schedule calculating 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.

Answer & Explanation Solved by verified expert

See Answer