Thornton Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Thornton's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise Year 2 Year 1 $22,800 $26,300 59,200 48,900 16,000 27,500 insurance Accounts payable 25,400 16,200 Salaries payable 4,800 3,850 Unearned service 950 2,750 revenue inventory Prepaid The Year 2 income statement is shown below: Income Statement Sales $ 604,000 Cost of goods sold (382,000)

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Chapter1: Financial Statements And Business Decisions
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Thornton Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and
corresponding balances were drawn from Thornton's Year 2 and Year 1 year-end balance sheets:
Account Title
Accounts
Year 2
Year 1
$22,800
$26,300
59,200 48,900
inventory
Prepaid
insurance
16,000
27,500
Accounts payable 25,400
16, 200
Salaries payable
4,800
3,850
Unearned service
950
2,750
revenue
receivable
Merchandise
The Year 2 income statement is shown below:
Income Statement
Sales
$ 604,000
Cost of goods sold (382,000)
Gross margin
222,000
Service revenue
Insurance expense
Salaries expense
Depreciation
expense
Operating income
Gain on sale of
equipment
Net income
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.
4,800
(39,000)
(158,000)
(5,900)
Complete this question by entering your answers in the tabs below.
Required Required
A
B
23,900
3,100
$ 27,000
Prepare the operating activities section of the statement of cash flows using the indirect
method. (Amounts to be deducted should be indicated with a minus sign.)
THORNTON BRANDS, INC.
Statement of Cash Flows (Operating
Activities)
Add:
For the Year Ended December 31, Year 2
Cash flows from operating
activities:
Deduct:
Add: noncash expenses
Net cash flow from operating
activities
$
0
Transcribed Image Text:Thornton Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Thornton's Year 2 and Year 1 year-end balance sheets: Account Title Accounts Year 2 Year 1 $22,800 $26,300 59,200 48,900 inventory Prepaid insurance 16,000 27,500 Accounts payable 25,400 16, 200 Salaries payable 4,800 3,850 Unearned service 950 2,750 revenue receivable Merchandise The Year 2 income statement is shown below: Income Statement Sales $ 604,000 Cost of goods sold (382,000) Gross margin 222,000 Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income 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. 4,800 (39,000) (158,000) (5,900) Complete this question by entering your answers in the tabs below. Required Required A B 23,900 3,100 $ 27,000 Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) THORNTON BRANDS, INC. Statement of Cash Flows (Operating Activities) Add: For the Year Ended December 31, Year 2 Cash flows from operating activities: Deduct: Add: noncash expenses Net cash flow from operating activities $ 0
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