Determine the cash flows from operations for 2015 using the direct method.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 3P
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Madha Company’s Income Statement for 2015 was as follows:
Sales $700,000
Cost of goods sold 250,000
Gross profit $450,000
Operating expenses 380,000
Income before income taxes 70,000
Additional Information on Madha Company were as follows:
1. The tax rate was 40%.
2. The sales include 40% cash sales. The remaining 60% was on credit.
3. Accounts receivable increased during 2015 by $15,000.
4. The allowance for doubtful accounts increased by $10,000 during 2015.
5. The company has one depreciable item: an equipment. During 2015 the equipment
(net) account increased by $70,000. The company purchased a new equipment for
$245,000 cash and sold an equipment with a book value of $42,000 for $80,000 cash.
6. Inventories decreased during 2015 by $15,000.
7. Operating expenses include depreciation. All other operating expenses are related to
salaries. The salaries payable account decreased during 2015 by $8,000.
8. Accounts payable increased during 2015 by 12,000.
9. Income tax payable decreased during 2015 by $400.
Required:
For Madha Corp:
Determine the cash flows from operations for 2015 using the direct method.

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