Exercise 122

Presented below is the income statement of Cowan, Inc.:

Sales revenue		$382,900
Cost of goods sold		221,500
Gross profit		$161,400
Operating expenses		86,200
Income before income taxes		75,200
Income taxes		29,400
Net income		$ 45,800

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

		Debit		Credit
Cash		$11,700
Accounts receivable		20,500
Inventories				$20,600
Salaries payable (operating expenses)		7,100
Accounts payable				15,400
Income taxes payable		3,900

The company also indicates that depreciation expense for the year was $16,000 and that the deferred tax liability account increased $2,200.

Prepare a schedule computing the net cash flow from operating activities by using the indirect method that would be shown on a statement of cash flows.

Prepare a schedule computing the net cash flow from operating activities by using the direct method that would be shown on a statement of cash flows.

Cowan, Inc. Statement of Cash Flows (Partial) (Indirect Method) Adjustments to reconcile net income to Cowan, Inc. Statement of Cash Flows (Partial) Direct Method $