Exercise 14A-4 Net Cash Provided by Operating Activities [LO14-4]

For the just completed year, Hanna Company had net income of $147,000. Balances in the companys current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash	$	56,000	$	77,000
Accounts receivable	$	164,000	$	196,000
Inventory	$	429,000	$	364,000
Prepaid expenses	$	12,100	$	13,600
Current liabilities:
Accounts payable	$	358,000	$	388,000
Accrued liabilities	$	7,400	$	11,500
Income taxes payable	$	39,400	$	33,000

The Accumulated Depreciation account had total credits of $52,000 during the year. Hanna Company did not record any gains or losses during the year.

The companys income statement for the year appears below:

Sales	$	1,090,000
Cost of goods sold		585,000
Gross margin		505,000
Selling and administrative expenses		316,000
Income before taxes		189,000
Income taxes		42,000
Net income	$	147,000

Required:

Using the direct method, convert the company's income statement to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

Hanna Company
Direct Method of Determining the Net Cash flows from Operating activities
Sales
Adjustments to a cash basis:
		$0
Cost of goods sold
Adjustments to a cash basis:
		0
Selling and administrative expenses
Adjustments to a cash basis:
		0
Income taxes
Adjustments to a cash basis:
		0
		$0