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Adams Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Adams's Year 2
Adams Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Adams's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue Year 2 $23,100 58,400 16,500 24,800 4,900 750 Year 1 $27,200 51,800 24,800 18,100 4,000 3,050 The Year 2 income statement is shown below: $ 619,000 (368,000) 251,000 5,306 Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income (39,000) (152,000) (4,900) 60,400 3,800 $ 64,200 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. Required A Required B Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.) ADAMS BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Inventory Salaries Insurance Net cash flow from operating activities 0 Required A Required B Required A Required B Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) ADAMS BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Add: Deduct: Add: noncash expenses Net cash flow from operating activities $ 0
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