Vernon Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Vernon's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise Year 2 Year 1 $23,400 $29, 200 56,200 inventory 51,000 Prepaid insurance 18,500 25,100 Accounts payable 24,000 18,800 Salaries payable 4,950 4,050 Unearned service 650 2,850 revenue The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income $ 604,000 (374,000) 230,000 6,000 (38,000) (153,000) (5,600) 39,400 5,000 $ 44,400 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. p. Prepare the operating activities section of the statement of cash flows using the indirect method.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question
Vernon Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and
corresponding balances were drawn from Vernon's Year 2 and Year 1 year-end balance sheets:
Account Title
Accounts
Year 2
Year 1
$23,400 $29, 200
56,200
51,000
inventory
Prepaid
insurance
18,500
25, 100
Accounts payable 24,000 18,800
Salaries payable 4,950
4,050
Unearned service
650
2,850
revenue
receivable
Merchandise
The Year 2 income statement is shown below:
Income Statement
Sales
Cost of goods sold
Gross margin
Service revenue
Insurance expense
Salaries expense
Depreciation
expense
Operating income
Gain on sale of
equipment
Net income
$ 604,000
(374,000)
230,000
6,000
(38,000)
(153,000)
Required Required
A
B
(5,600)
39,400
5,000
$ 44,400
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.
Prepare the operating activities section of the statement of cash flows using the direct
method. (Cash outflows should be indicated with minus sign.)
VERNON 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:Vernon Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Vernon's Year 2 and Year 1 year-end balance sheets: Account Title Accounts Year 2 Year 1 $23,400 $29, 200 56,200 51,000 inventory Prepaid insurance 18,500 25, 100 Accounts payable 24,000 18,800 Salaries payable 4,950 4,050 Unearned service 650 2,850 revenue receivable Merchandise The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income $ 604,000 (374,000) 230,000 6,000 (38,000) (153,000) Required Required A B (5,600) 39,400 5,000 $ 44,400 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. Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.) VERNON 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 >
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education