Question

Portions of the financial statements for Parnell Company are provided below.
 

PARNELL COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues and gains:
Sales	$	790
Gain on sale of buildings		10		$	800
Expenses and loss:
Cost of goods sold	$	295
Salaries		119
Insurance		39
Depreciation		122
Interest expense		49
Loss on sale of machinery		12			636
Income before tax					164
Income tax expense					82
Net income				$	82

 

PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s)
	Year
		2018			2017		Change
Cash	$	133		$	101		$	32
Accounts receivable		323			217			106
Inventory		322			424			(102	)
Prepaid insurance		67			87			(20	)
Accounts payable		209			118			91
Salaries payable		104			94			10
Deferred income tax liability		62			53			9
Bond discount		188			201			(13	)

 
Required:

1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method.
2. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method.

REQUIREMENT 1:

 REQUIREMENT 2:

Answer 1

the statement of cash flows for Parnell Company using the direct method. Cash Flows from Operating Activities: Particulars Amount this coloumn Only for explanation Cash received from customers $684.00|790 SALES - INCREASE IN ACCOUNT REC.106 cogs - Desrease in inventory and increase in account payable Cash paid to suppliers $102.00|(295-102-91) Cash paid to employees -$109.00 Salary - Increase in salary payables (119-10) Cash paid for insurance Cash paid for interest Cash paid for income taxes Net cash flows from operating activities $19.00 Insurance expanses less decrease in prepaid expenses 39-10 -$36.00|interest expense less bond discount (49-13) -$73.00 Income tax less change in defered tax liability( 82-9) $345.00

the statement of cash flows for Parnell Company using the indirect method. Cash Flows from Operating Activities: Net income $82.00 Adjustments for noncash effects: Depreciation expense Gain on sale of buildings Loss of sale of equipment $122.00 $10.00 $12.00 Change in operating assets and liabilities Increase in accounts receivable Decrease in inventory Increase in accounts payable Increase in salaries payable Decrease in prepaid insurance Increase in deferred income tax liability Decrease in bond discount -$106.00 $102.00 $91.00 $10.00 $20.00 $9.00 $13.00 Net cash flows from operating activities $345.00