Portions of the financial statements for Hawkeye Company are provided below. HAWKEYE COMPANY Income Statement For the Year Ended December 31, 2013 Sales Cost of goods sold Gross margin Salaries expense Depreciation expense Interest expense Gain on sale of cash equivalents $ 870 (335) 535 $ 229 187 37 (4) (449) Income before taxes and extraordinary loss Income tax expense Income before extraordinary loss 86 (43) 43 Extraordinary loss (flood damage to inventory) Less: Tax savings 10 G55 (5) (5) Net Income $ 38 HAWKEYE COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2013 and 2012 Year 2013 2012 Change Cash $238 $213 $25 Accounts receivable 392 415 (23) Inventory 886 863 23 Accounts payable 223 260 (37) Salaries payable 183 194 (11) Interest payable 61 53 8 Income taxes payable 93 110 (17) Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Amounts to be deducted should be indicated with a minus sign.) Direct Method Cash Flows from Operating Activities: Cash received from customers Gain on sale of cash equivalents Cash paid to suppliers Cash paid to employees Cash paid for interest Cash paid for income taxes Net cash flows from operating activities 2. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) Indirect Method $ Cash Flows from Operating Activities: Net income Adjustments for noncash effects: Depreciation expense Extraordinary loss Changes in operating assets and liabilities: Decrease in accounts receivable Increase in inventory Decrease in accounts payable Decrease in salaries payable Increase in interest payable Decrease in income taxes payable Net cash flows from operating activities