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What is the purpose of the statement of cash flows? What information does it provide? (b) Prepare the operating activities section of the statement of

What is the purpose of the statement of cash flows? What information does it provide?

(b) Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2018, for Vancare Company, using (1) the indirect method (2) the direct method.

Vancare Company

Income Statement

For the year ended December 31, 2018

Sales revenue


$6,900,000

Cost of goods sold



Beginning inventory

$1,900,000


Purchases

$4,400,000


Goods available for sale

$6,300,000


Ending inventory

$1,600,000


Cost of goods sold


$4,700,000

Gross Profit


$2,200,000

Operating expenses



Selling expense

$ 450,000


Administrative expense

$ 700,000

$1,150,000

Net Income


$1,050,000




Additional information:

1. Accounts receivable decreased $310,000 during the year.

2. Prepaid expenses increased $170,000 during the year.

3. Accounts payable to suppliers of merchandise decreased $275,000 during the year.

4. Accrued expenses payable decreased $120,000 during the year.

5. Administrative expenses include depreciation expense of $60,000.

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