Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets: Year 1 $52,000 72,000 32,000 28,000 Account Title Year 2 Accounts receivable $48,000 Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue 78,000 24,000 31,000 8,200 2,400 7,800 3,600 The Year 2 income statement is shown below: Income Statement $ 720,000 (398,000) 322,000 6,000 (36,000) (195,000) (12,000) 85,000 Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment 4,500 Net income $ 89,500 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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding
balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets:
Account Title
Year 2
Year 1
$52,000
72,000
32,000
28,000
Accounts receivable
$48,000
78,000
24,000
31,000
Merchandise inventory
Prepaid insurance
Accounts payable
Salaries payable
8,200
7,800
Unearned service revenue
2,400
3,600
The Year 2 income statement is shown below:
Income Statement
$ 720,000
(398,000)
322,000
6,000
(36,000)
(195,000)
(12,000)
85,000
4,500
Sales
Cost of goods sold
Gross margin
Service revenue
Insurance expense
Salaries expense
Depreciation expense
Operating income
Gain on sale of equipment
Net income
89,500
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.
Transcribed Image Text:Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets: Account Title Year 2 Year 1 $52,000 72,000 32,000 28,000 Accounts receivable $48,000 78,000 24,000 31,000 Merchandise inventory Prepaid insurance Accounts payable Salaries payable 8,200 7,800 Unearned service revenue 2,400 3,600 The Year 2 income statement is shown below: Income Statement $ 720,000 (398,000) 322,000 6,000 (36,000) (195,000) (12,000) 85,000 4,500 Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income 89,500 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.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be
indicated with minus sign.)
GREEN BRANDS, INC.
Statement of Cash Flows (Operating Activities)
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Cash collections from customers for sales
Cash collections from customers for services
Cash payments for:
Net cash flow from operating activities
$
< Required A
Required B >
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required A Required B Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.) GREEN BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Net cash flow from operating activities $ < Required A Required B >
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