Problem

The direct versus the indirect method of determining cash flows from operating activitiesT...

The direct versus the indirect method of determining cash flows from operating activities

The following accounts and corresponding balances were drawn from Littlejohn Company’s 2012 and 2011 year-end balance sheets:

Account Title

2012

2011

Accounts receivable

$89,000

$92,000

Prepaid rent

1,100

1,500

Utilities payable

2,100

2,600

Other operating expenses payable

42,000

49,000

The 2012 income statement is shown below:

Income Statement

 

Sales

$312,000

Rent expense

(36,000)

Utilities expense

(41,900)

Other operating expenses

(189,000)

Net income

$ 45,100

Required

a. Prepare the operating activities section of the statement of cash flows using the direct method.


b. Prepare the operating activities section of the statement of cash flows using the indirect method.

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