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For the just completed year, Hanna Company had net income of $125,000. Balances in the company's current asset and current liability accounts at the beginning
For the just completed year, Hanna Company had net income of $125,000. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Beginning Year of Year Current assets: Cash and cash equivalents $ 64,000 $ 77,000 Accounts receivable $162,000 $182,000 Inventory $429,000 $367,000 Prepaid expenses $ 11,900 $ 14,100 Current liabilities: Accounts payable $360,000 $398,000 Accrued liabilities $ 8,800 $ 11,900 Income taxes $ 42,000 $ 35,000 payable The Accumulated Depreciation account had total credits of $46,000 during the year. Hanna Company did not record any gains or losses during the year. The company's income statement for the year appears below: Sales Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income taxes Net income $1,060,000 590,000 470,000 308,000 162,000 37,000 $ 125,000 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 $
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