Question No. 2

Presented below is the income statement of Cowan, Inc.:

Sales	$380,000
Cost of goods sold	225,000
Gross profit	$155,000
Operating expenses	85,000
Income before income taxes	70,000
Income taxes	28,000
Net income	42,000

In addition, the following information related to net changes in working capital is presented:

	Debit	Credit
Cash	$12,000
Accounts receivable	20,000
Inventories	19,400
Salaries payable (operating expenses)		$8,000
Accounts payable		12,000
Income taxes payable	3,000

The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.

Instructions

Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows using the indirect method only.