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Chapter 14: Q12SE (page 772)

Preparing operating activities using the direct method Amy鈥檚 Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business鈥檚 statement of cash flows for the year ended June 30, 2018, using the direct method.

Short Answer

Expert verified

Net cash provided by operating activities is $7,000.

Step by step solution

01

Step-by-Step SolutionStep 1: Cash flow from operating activities

Cash flows from operating activities

Receipts:

Collection from customers

$188,000

Payments:

To suppliers

($115,000)

To employees

($66,000)

Net cash provided by operating activities

$7,000

02

Classification of investing and financing activity

Transaction

Activity

Cash payment for purchase of equipment

Investing

Payment of notes payable

Financing

Payment of dividends

Financing

Cash receipt from issuance of stock

Financing

Cash receipt from sale of land

Investing

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Most popular questions from this chapter

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.

Preparing the statement of cash flows鈥攄irect method Use the Rolling Hills, Inc. data from Problem P14-34A. Requirements

1. Prepare the 2018 statement of cash flows by the direct method.

2. How will what you learned in this problem help you evaluate an investment?

Question: 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

Preparing the statement of cash flows鈥攊ndirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Sweet Valley, Inc. follow:

Additionally, Sweet Valley purchased land of \(20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset were $13,240. Plant asset was acquired for cash.

Requirements

1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.

2. How will what you learned in this problem help you evaluate an investment?

Question: Muench, Inc.鈥檚 accountant has partially completed the spreadsheet for the statement of cash flows. Fill in the remaining missing information.
See all solutions

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