The income statement for Tremblant Limited is presented here:

Tremblant's statement of financial position contained these comparative data at December 31:

Additional information:
1. Operating expenses include depreciation expense, $50,000; amortization expense, $15,000; administrative expenses, $110,000; salaries expense, $500,000; and loss on the sale of equipment, $26,000.
2. Interest expense includes $10,000 related to the amortization of a bond premium on bonds payable.
3. Prepaid expenses, accounts payable, and unearned revenue relate to operating (administrative) expenses.
Instructions
(a) Prepare the operating activities section of the statement of cash flows, using either
(1) The indirect method
(2) The direct method, as assigned by your instructor.
(b) Which method-indirect or direct-do you recommend this company use to prepare its operating activities section? Explain your reasoning.

Transcribed Image Text:

TREMBLANT LIMITED Income Statement Year Ended December 31, 2012 Service revenue Operating expenses Profit from operations Interest expense Profit before income tax Income tax expense Profit $925,000 701,000 224,000 75,000 149,000 37,250 $111,750 Accounts receivable Prepaid expenses Accounts payable Salaries payable Unearned revenue Interest payable Income tax payable 2012 $57,000 12,000 36,000 19,500 12,000 6,250 4,000 2011 $47,000 15,000 41,000 20,000 9,000 5,000 9,250