Cash flows from operating activities for both the indirect and direct methods are presented for Electronic Transformations. Cash Flows from Operating Activities (Indirect method) Net income $ 35,700 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 8,700 Increase in accounts receivable (12,700 ) Increase in accounts payable 7,700 Increase in income tax payable 5,700 Net cash flows from operating activities $ 45,100 Cash Flows from Operating Activities (Direct method) Cash received from customers $ 81,500 Cash paid for operating expenses (25,700 ) Cash paid for income taxes (10,700 ) Net cash flows from operating activities $ 45,100 Required: Complete the following income statement for Electronic Transformations. Assume all accounts payable are to suppliers.

The cash flow from the operating activities refers to the amount of money that company brings from the regular activities of manufacturing and selling the goods and services. It is the flow of cash in the firm and out of the firm.

Sales revenue 94,200

supplies expense (33,400 )

depreciation expense ( 8,700 )

income tax expense ( 16,400 )

Net income 35,700

cash from customer 81,500

plus 12,700 not collected (increase in Average Revenue)

sales revenue = 94,200

cash paid for operating expense 25,700

increase in account payable 7,700

we pay 25,700 expenses and also we delay payment of additional 7,700 accrued expenses:

supplies expense 33,400

paid for income tax payable 10,700

increase in income tax payable 5,700

income tax expense 16,400

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