## Income Statement of Cowan, Inc.**Sales Revenue:** $380,000**Cost of Goods Sold:** $225,000**Gross Profit:** $155,000**Operating Expenses:** $95,000**Income Before Income Taxes:** $60,000**Income Taxes:** $24,000**Net Income:** $36,000---### Additional Information on Net Changes in Working Capital| | Debit | Credit ||----------------------|---------|---------|| **Cash** | $12,000 | || **Accounts Receivable** | $25,000 | || **Inventories** | | $19,400 || **Salaries Payable (Operating Expenses)** | $8,000 | || **Accounts Payable** | | $14,000 || **Income Taxes Payable** | | $3,000 |The company also reports a depreciation expense of $16,700 for the year and an increase in the deferred tax liability account by $2,600. **Preparation of Cash Flows Statement Using Indirect Method**To effectively compute the net cash flow from operating activities using the indirect method, follow this structured approach. This partial statement of cash flows focuses on adjustments needed to reconcile net income to net cash.**COWAN, INC.**Statement of Cash Flows (Partial)(Indirect Method)1. **Net Income** - Provide the net income amount here: $ __________2. **Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:** - **Adjustments Box 1**: - Description: Select appropriate adjustment description from dropdown. - Amount: Indicate the amount in the box provided. - **Adjustments Box 2**: - Description: Select appropriate adjustment description from dropdown. - Amount: Indicate the amount in the box provided. - **Adjustments Box 3**: - Description: Select appropriate adjustment description from dropdown. - Amount: Indicate the amount in the box provided. - **Adjustments Box 4**: - Description: Select appropriate adjustment description from dropdown. - Amount: Indicate the amount in the box provided. - **Additional Rows (if necessary)**: - Continue to select the appropriate descriptions and input amounts as needed.**Note**: Red text emphasizes that any decrease in cash flow should be notated with a negative sign (e.g., -15,000) or enclosed in parentheses (e.g., (15,000)).This detailed method enhances understanding and accuracy when preparing a cash flow statement, allowing for clear reconciliation of changes in cash and identifying the financial health based on cash operations.

To calculate net cash from operating activities, the net income is to be adjusted with non-cash…

Presented below is the income statement of Cowan, Inc.: Sales revenue Cost of goods sold Gross profit Operating expenses Income before income taxes Income taxes Net income Cash $380,000 Accounts receivable 225,000 155,000 95,000 60,000 24,000 In addition, the following information related to net changes in working capital is presented: $36,000 Inventories Salaries payable (operating expenses) Accounts payable Income taxes payable Debit $12,000 25.000 8,000 3,000 Credit $19,400 14,000 The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.

Presented below is the income statement of Cowan, Inc.: Sales revenue Cost of goods sold Gross profit Operating expenses Income before income taxes Income taxes Net income Cash $380,000 Accounts receivable 225,000 155,000 95,000 60,000 24,000 In addition, the following information related to net changes in working capital is presented: $36,000 Inventories Salaries payable (operating expenses) Accounts payable Income taxes payable Debit $12,000 25.000 8,000 3,000 Credit $19,400 14,000 The company also indicates that depreciation expense for the year was $16,700 and that the deferred tax liability account increased $2,600.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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