Claims Corporation

Income Statement

For the Year Ended December 31, 2014

Sales $80,700

Cost of goods sold (46,200)

Gross margin 34,500

Operating expenses:

Selling and general expenses $ 9,200

Depreciation expense 2,000 (11,200)

Operating income 23,300

Gain on sale of land held as investment 5,700

Income before income tax 29,000

Income tax expense (11,600)

Net income $17,400

2013 2014

Cash $12,200 $ 4,300

Accounts receivable 4,700 10,200

Inventory 7,000 11,800

Prepaid selling/general expenses 3,600 850

Accounts payable 3,000 5,800

Accrued liabilities 1,670 2,900

Required

a. Prepare a schedule documenting Claims Corporation's net cash flow from operating activities

for the year ended December 31, 2014, using the indirect method.

b. Prepare a schedule documenting Claims Corporation's net cash flow from operating activities

for the year ended December 31, 2014, using the direct method. Assume that selling and

general expenses are related to both prepaid expenses and accrued liabilities.