Portions of the financial statements for Hawkeye Company are provided below.
HAWKEYE COMPANY
Income Statement
For the Year Ended December 31, 2013
Sales $ 850
Cost of goods sold (325 )
Gross margin 525
Salaries expense $ 227
Depreciation expense 185
Interest expense 35
Gain on sale of cash equivalents (4 ) (443 )
Income before taxes and extraordinary loss 82
Income tax expense (41 )
Income before extraordinary loss 41
Extraordinary loss (flood damage to inventory) 12
Less: Tax savings (6 ) (6 )
Net Income $ 35
HAWKEYE COMPANY
Selected Accounts from Comparative Balance Sheets
2013 and 2012
Year
2013 2012 Change
Cash $242 $215 $27
Accounts receivable 390 411 (21)
Inventory 890 865 25
Accounts payable 225 264 (39)
Salaries payable 185 198 (13)
Interest payable 65 55 10
Income taxes payable 95 114 (19)
Required:
1.Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Amounts to be deducted should be indicated with a minus sign.)
2.Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect method
1. DIRECT METHOD
Cash Flows from Operating Activities:
Cash received from customers $ ______________
Gain on sale of cash equivalents $¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬___________________
Cash paid to suppliers $________________________
Cash paid for interest $_______________________
Cash paid from income $______________________
NET cash flow from operating activities $_________________
Indirect Method
Cash Flows from Operating Activities:
Net income $ _____________________
Adjustments for non cash effects:
Depreciation expense $ ___________
Extraordinary loss/gain $__________
Changes in operating assets and liabilities:
Decrease in accounts receivable $__________
Increase in inventory$__________
Decrease in accounts payable $__________
Decrease in salaries payable $__________
Increase in Interest payable $____________________
Decrease in income taxes payable $_____________________
Net cash flow from operating activities $________________