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Problem 14-14A (Algo) The direct versus the indirect method of determining cash flow from operating activities LO 14-1, 14-2 Rundle Brands, Inc., presents its statement
Problem 14-14A (Algo) The direct versus the indirect method of determining cash flow from operating activities LO 14-1, 14-2 Rundle Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Rundle's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue Year 2 $21,100 58,200 18,000 24,700 4,950 800 Year 1 $26,600 48,800 25,600 19,800 3,950 2,900 The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income $ 621,000 (378,000) 243,000 5,100 (39,000) (144,000) (5,400) 59,700 3,300 $ 63,000 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. Required A Required B Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.) RUNDLE BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Net cash flow from operating activities $ Required A Required B Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) RUNDLE BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Add: Deduct: Add: noncash expenses Net cash flow from operating activities $ 0
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