Question
Lala Inc. (LI), a publicly accountable company, reported the following changes in its current assets and current liabilities from 2019 to 2020: Cash Increase $17,800
Lala Inc. (LI), a publicly accountable company, reported the following changes in its current assets and current liabilities from 2019 to 2020: Cash Increase $17,800 Accounts receivable (net) Increase $20,000 Inventory Decrease $ 4,600 Accounts payable Increase $ 7,675 Taxes payable Decrease $ 2,000 LI reported net income of $176,340 for 2020, including depreciation expense of $64,550. LI also reported a loss on sale of equipment of $35,000 and a gain on the retirement of long-term debt of $23,340 in 2020. LI paid dividends of $40,000 and reports dividends paid as a financing activity on its cash flow statement.
Required: a) Prepare the operating activities section of the statement of cash flows for 2020 using the indirect method.
b) Provide one reason why a company might prefer the indirect method over the direct method of presenting operating activities.
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