Cash flows from operating activities for both the indirect and direct methods are presented for Reverse Logic. All amounts are in thousands (000s).

Required:

Complete the following income statement for Reverse Logic. Assume all accounts payable are to suppliers.

Use the following calculations and work backwards from bottom (in red) to top for each item.

Net sales
± Change in accounts receivable ....................... ____________
= Cash received from customers....................... _____________
Cost of goods sold
± Change in inventory ............................................ ____________
= Purchases
± Change in accounts payable ............................. ____________
= Cash paid to suppliers ......................................... ____________

Operating expenses
± Change in prepaid rent ....................................... ____________
= Cash paid for operating expenses ................. ____________
Income tax expense
± Change in income tax payable ......................... ____________
= Cash paid for income taxes ................................ ____________

Transcribed Image Text:

Cash Flows from Operating Activities (Indirect method) Net income $174 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 62 Increase in accounts receivable (38) Decrease in inventory 50 Increase in prepaid rent Decrease in accounts payable Decrease in income tax payable (5) (11) (9) Net cash flows from operating activities $223 Cash Flows from Operating Activities (Direct method) $ 4,070 (2,585) (1,163) (99) Cash received from customers Cash paid to suppliers Cash paid for operating expenses Cash paid for income taxes Net cash flows from operating activities $223