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Chapter 14: 14SE (page 732)

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

Requirements

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.

2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.

Short Answer

Expert verified

Requirement 1. Collections from customers during 2018 is $123,000

Requirement 2. Payments for inventory during 2018 is $63,000.

Step by step solution

01

Computation of collections from customers during 2018 for Red Toy Company

Particulars

Amount($)

Particulars

Amount($)

Account Receivables (31st December,2017)

42,000

Account Receivables (31st December,2018)

53,000

Sales revenue

134,000

Cash collected (Balancing figure)

123,000

Total

176,000

Total

176,000

02

Computation of payments for inventory during 2018

Cash paid for inventory = Cost of goods sold 鈥� Beginning merchandise inventory + Ending merchandise inventory + Beginning Accounts Payable - Ending Accounts Payable

Cash paid for inventory =$79,000 鈥�$88,000 + $76,000 + $38,000 - $42,000

=$63,000

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Most popular questions from this chapter


Question: Computing cash flows for investing and financing activities Consider the following facts for Java Jolt:

  1. Beginning and ending Retained Earnings are \(45,000 and \)70,000, respectively. Net income for the period is \(60,000.
  2. Beginning and ending Plant Assets are \)124,500 and \(134,500, respectively.
  3. Beginning and ending Accumulated Depreciation鈥擯lant Assets are \)21,500 and \(26,500, respectively.
  4. Depreciation Expense for the period is \)17,000, and acquisitions of new plant assets total \(29,000. Plant assets were sold at a \)5,000 gain. Requirements
  5. How much are cash dividends?
  6. What was the amount of the cash receipt from the sale of plant assets?

Computing cash flow items鈥攄irect method Consider the following facts:

  1. Beginning and ending Accounts Receivable are \(24,000 and \)20,000, respectively. Credit sales for the period total \(68,000.
  2. Cost of goods sold is \)77,000.
  3. Beginning Merchandise Inventory balance is \(29,000, and ending Merchandise Inventory balance is \)26,000.
  4. Beginning and ending Accounts Payable are \(12,000 and \)16,000, respectively.

Requirements

  1. Compute cash collections from customers.
  2. Compute cash payments for merchandise inventory

Computing operating activities cash flow鈥攊ndirect method

The records of Vintage Color Engraving reveal the following:

Net income \( 36,000

Depreciation expense \) 5,000

Sales revenue 53,000

Decrease in current liabilities 19,000

Loss on sale of land 4,000

Increase in current assets other than cash 10,000

Acquisition of land 35,000

Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.

Question: If current assets other than cash increase, what is the effect on cash? What about a decrease in current assets other than cash?

Use the Rouse Exercise Equipment data in Exercises E14-23 and E14-24. Rouse plansto purchase a truck for \(23,000 and a forklift for \)125,000 next year. In addition, itplans to pay cash dividends of $3,500. Assuming Rouse plans similar activity for 2019,what would be the amount of free cash flow?
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