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Question: Set up : the operating activities section of the statement of cash flows using the direct method.
The income statement of ABC Company is shown below.
| ABC COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 |
| Sales revenue | | | | $6,960,000 |
| Cost of goods sold | | | | |
| Beginning inventory | | $1,910,000 | | |
| Purchases | | 4,380,000 | | |
| Goods available for sale | | 6,290,000 | | |
| Ending inventory | | 1,610,000 | | |
| Cost of goods sold | | | | 4,680,000 |
| Gross profit | | | | 2,280,000 |
| Operating expenses | | | | |
| Selling expenses | | 450,000 | | |
| Administrative expenses | | 710,000 | | 1,160,000 |
| Net income | | | | $1,120,000 |
Additional information:
| 1. | | Accounts receivable decreased $380,000 during the year. |
| 2. | | Prepaid expenses increased $190,000 during the year. |
| 3. | | Accounts payable to suppliers of merchandise decreased $290,000 during the year. |
| 4. | | Accrued expenses payable decreased $90,000 during the year. |
| 5. | | Administrative expenses include depreciation expense of $70,000. |
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