Question #8: Portions of the financial statements for Clear Transmissions Company are provided below. $1,320 (500) 820 (456) 364 (182) 182 CLEAR TRANSMISSIONS COMPANY Income Statement For the Year Ended December 31, 2013 ($ in 000s) Sales Cost of goods sold Gross margin Salaries expense $220 Depreciation expense 180 Patent amortization expense 10 Interest expense 40 Loss on sale of cash equivalents 6 Income before taxes and extraordinary gain Income tax expense Income before extraordinary gain Extraordinary gain (sale of subsidiary) 20 Less: Tax on gain (10) Net Income CLEAR TRANSMISSIONS COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2013 and 2012 ($ in 000s) Year 2013 2012 Cash $100 Accounts receivable 220 232 Inventory 440 450 140 Accounts payable 134 80 86 Salaries payable 25 20 Interest payable 15 10 Income taxes payable 10 $ 192 $102 Change $2 (12) (10) 6 (6) 5 Required: a) Prepare ALL of the necessary journal entries to reconcile net income to net cash from operating activities under the direct method b) Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the direct method. c) Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the indirect method