Statement of Cash Flows—Direct Method Glendive Corp. is in the process of preparing its statement of cash fl ows for the year ended June 30, 2010. An income statement for the year and comparative balance sheets are as follows:

For the Year Ended June 30, 2010 Sales revenue $550,000 Cost of goods sold 350,000 Gross profi t $200,000 General and administrative expenses $ 55,000 Depreciation expense 75,000 Loss on sale of plant assets 5,000 Total expenses and losses $135,000 Income before interest and taxes $ 65,000 Interest expense 15,000 Income before taxes $ 50,000 Income tax expense 17,000 Net income $ 33,000.

June 30 2010 2009 Cash $ 31,000 $ 40,000 Accounts receivable 90,000 75,000 Inventory 80,000 95,000 Prepaid rent 12,000 16,000 Total current assets $ 213,000 $ 226,000 Land $ 250,000 $ 170,000 Plant and equipment 750,000 600,000 Accumulated depreciation (310,000) (250,000)
Total long-term assets $ 690,000 $ 520,000 Total assets $ 903,000 $ 746,000 Accounts payable $ 155,000 $ 148,000 Other accrued liabilities 32,000 26,000 Income taxes payable 8,000 10,000 Total current liabilities $ 195,000 $ 184,000 Long-term bank loan payable $ 100,000 $ 130,000 Common stock $ 350,000 $ 200,000 Retained earnings 258,000 232,000 Total stockholders’ equity $ 608,000 $ 432,000 Total liabilities and stockholders’
equity $ 903,000 $ 746,000.

Dividends of $7,000 were declared and paid during the year. New plant assets were purchased during the year for $195,000 in cash. Also, land was purchased for cash. Plant assets were sold during the year for $25,000 in cash. The original cost of the assets sold was $45,000, and their book value was $30,000. Additional stock was issued for cash, and a portion of the bank loan was repaid.
Required 1. Prepare a statement of cash fl ows for 2010 using the direct method in the Operating Activities section.
2. Evaluate the following statement: Whether a company uses the direct or indirect method to report cash fl ows from operations is irrelevant because the amount of cash fl ow from operating activities is the same regardless of which method is used.AppendixLO1