Wednesday, 30 October 2019

Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method

Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI’s Year 2 and Year 1 year-end balance sheets:
Account TitleYear 2Year 1
Accounts receivable$21,300$29,700
Merchandise inventory58,70050,000
Prepaid insurance18,40025,700
Accounts payable26,10018,900
Salaries payable4,6504,150
Unearned service revenue9002,850

The Year 2 income statement is shown next:
Income Statement
Sales$611,000
Cost of goods sold(371,000)
Gross margin240,000
Service revenue4,700
Insurance expense(39,000)
Salaries expense(156,000)
Depreciation expense(5,500)
Operating income44,200
Gain on sale of equipment4,200
Net income$48,400
b. Prepare the operating activities section of the statement of cash flows using the indirect method for Year

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