Question

Sarasota Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

SARASOTA INC. Comparative Statement of Financial Position December 31
			2020			2019
Cash			$46,780			$25,140
Accounts receivable			57,860			51,040
Inventory			40,080			60,160
Prepaid rent			5,260			4,130
Equipment			162,550			130,040
Accumulated depreciation–equipment			(35,260	)		(25,130	)
Goodwill			22,000			58,000
	Total assets		$299,270			$303,380
Accounts payable			$46,050			$40,040
Income tax payable			4,080			6,160
Salaries and wages payable			8,140			4,140
Short–term loans payable			7,860			10,040
Long–term loans payable			62,000			77,000
Common shares			130,000			130,000
Retained earnings			41,140			36,000
	Total liabilities and shareholders’ equity		$299,270			303,380

SARASOTA INC. Income Statement Year Ending December 31, 2020
Sales revenue					$344,780
Cost of goods sold					165,000
Gross margin					179,780
Operating expenses					120,000
Operating income					59,780
Interest expense		$12,200
Impairment loss–goodwill		36,000
Gain on disposal of equipment		(2,200	)		46,000
Income before income tax					13,780
Income tax expense					4,140
Net income					$9,640

Additional information:

1.		Dividends on common shares in the amount of $4,500 were declared and paid during 2020.
2.		Depreciation expense is included in operating expenses, as is salaries and wages expense of $72,500.
3.		Equipment with a cost of $22,000 that was 70% depreciated was sold during 2020.

Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).)

Answer 1

X for cash flow from operating activities F SARASOTA INC. statement of cash flows (using direct method) for the year ended December 31,2020 cash flow from operating activities outflow for operating expenses $ 23,100 receipts from customers $ 337,960 payments to suppliers $ 138,910 outflow for income taxes $ 6,220 payments for salaries and wages -$ 68,500 payments for interest $ 12,200 net cash flow from operating activities $ 89,030 $ 54,510 $ 8,800 cash flow from investing activities purchase of equipment sale of equipment purchase of other long term assets purchase of marketable securities net cash flow from investing activities | |-$ 45,710 cash flow from financing activities inflow from stock issue payment of dividend repayment of long term loan repayment of short term loan net cash flow from financing activities $ 4,500 $ 15,000 -$ 2,180 |-$ 21,680 net change in cash beginning cash balance ending cash balance $ 21,640 $ 25,140 $ 46,780

for formulas and calculations, refer to the image below -

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X fx cash flow from operating activities B SARASOTA INC. statement of cash flows (using direct method) for the year ended December 31,2020 cash flow from operating activities outflow for operating expenses --(120000-72500-25530-4130+5260) receipts from customers =344780+51040-57860 payments to suppliers --(165000+40080-60160+40040-46050) outflow for income taxes =-4140+6160-4080) payments for salaries and wages --(72500+4140-8140) payments for interest -12200 net cash flow from operating activities =SUM(C6:C11) --(162550+22000-130040) =(22000*0.3+(2200)) cash flow from investing activities purchase of equipment sale of equipment purchase of other long term assets purchase of marketable securities net cash flow from investing activities =SUM(C15:C18) cash flow from financing activities inflow from stock issue payment of dividend repayment of long term loan repayment of short term loan net cash flow from financing activities -4500 =62000-77000 =7860-10040 =SUM(C22:025) net change in cash beginning cash balance ending cash balance =D12+D19+D26 25140 =D28+D29

In case you have any query, kindly ask in comments.

Answer 2

how can you get the number 25530 in cash paid for operating expense?