| Gainesville Corporation’s income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company’s operating activities generated positive cash flow of $129,000. Use the “indirect” approach to demonstrate how this amount was calculated. The following additional information is available: | ||||
| Beginning-of-Period Balance | End-of-Period Balance | |||
| Account receivable | $70,000 | $82,000 | ||
| Inventory | 50,000 | 41,000 | ||
| Accounts payable | 37,000 | 44,000 | ||
| Particular | Amount in $ |
| Gross Profit | 300000 |
| Less: | |
| selling & admin, expenses | 140000 |
| income taxes | 45000 |
| net income | 115000 |
| Cash Flow Using Indirect Method | |
| Particular | Amount in $ |
| Net Income | 115000 |
| depreciation | 10,000 |
| increase in A/R | -12000 |
| decrease in inventory | 9000 |
| increase in A/P | 7000 |
| positive cash flow from operating activities | 129,000 |
