Cash Flows from Operations (Indirect and Direct Methods)

The following combined income and retained earnings statement, along with selected balance sheet data, are provided for McDuffie Company:

Required:
1. Using the indirect method, compute the net cash flows from operations for McDuffie Company for 2009.
2. Using the direct method, compute the net cash flows from operations for McDuffie Company for 2009.
3. What is the impact of dividends paid on net cash flows from operations? Explain.

Transcribed Image Text:

McDuffie Company Combined Income and Retained Earnings Statement For the Year Ended December 31, 2009 Net sales revenue Other revenues Total revenues Expenses: Cost of goods sold Selling and administrative expenses Depreciation expense Interest expense.. Total expenses Income before taxes Income taxes Net income Retained earnings, January 1, 2009 Dividends declared and paid Retained earnings, December 31, 2009 *Gain on sale of equipment (cost, $8,400; book value, $6,000; sales price $9,000). $105,000 3,000* $108,000 $55,000 15,200 5,400 1,200 76,800 $ 31,200 9,360 $ 21,840 33,500 $ 55,340 4,000 $ 51,340