Reference no: EM132645999

Question - Statement of Cash Flow

Tom and Company reports the following income statement for the year ended December 31, 2012:

Sales $2,100,000

Cost of goods sold 831,600

Gross profit 1,268,400

Depreciation expense 88,000

Selling and administrative expense 758,000

Income before tax 422,400

Income tax expense 168,960

Net income $253,440

The company also reports the following information from the balance sheet:

December 31, 2012 December 31, 2011

Cash $90,000 $24,000

Accounts receivable 80,000 60,000

Inventory 14,000 16,000

Accounts payable 150,000 170,000

Accrued selling and admin expenses 12,000 8,000

Taxes payable 204,000 82,000

Dividends payable 20,000 44,000

Required -

a. Prepare, in good form, the operating section of the statement of cash flow, using the direct method for Tom and Company for December 31, 2012.

b. Prepare, in good form, the operating section of the statement of cash flow, using the indirect method for Tom and Company for December 31, 2012.