Question

(ILO 1-5) (20 points) Problem 2. Please, prepare for ABC Inc. Cash Flow Statement based on the below given information by direct method. Income Statement Net sales 3,200,000 Interest revenue 40,000 Gain on sale of marketable securities 34,000 Total revenue 3,274,000 Costs and expenses COGS 1,620,000 Operating expenses (including depreciation expense of 150 000) 1,240,000 Income tax expense 100,000 Interest expense 42,000 Loss on sale of PPE 12,000 Total expenses 3,014,000 Net income 260,000 Additional information: 1. Accounts receivable increased by 60 000 Accrued interest receivable decreased by 2000 2. 4. Short-term prepayments of operating expenses increased by 6000, accrued liabilities decreased by 8000. 3. Inventory decreased by 60 000, accounts payble decreased by 16 000. 5. Accrued interest payable increased by 4000. 6. Accrued income taxes payble decrased by 14 000. 7. Cash and cash equivalents for the beginning of year is 244 000 and year end is 164 00. 8. The following information is given: Credit entries Debit entries Accounts 38 000 Marketable securities Notes receivable (cash loans) PPE (AD is 36 000) Note payable Capital stock Retained Earnings (dividends payment) 60 000 28 000 44 000 36 000 500 000 82 000 92 000 180 000 260 000 120 000

Answer 1

Cash flow from operating activities

cash received from customers (Sales+decrease in accounts receivables) 3140000

cash received from interest (interest revenue+ decrease in interest receivable)    (42000)

cash paid to suppliers (COGS-decrease in inventory+decrease in a/c payable) (1576000)

cash paid for operating expenses (opearating expense- dep+ inc in prepayments+ decrease in accrued liabilities) (1104000)

cash paid for income tax ( income tax expense + decrease in tax payable) (114000)

cash paid for interest (interest expense- increase in interest payable) (38000)

Net cash flow from operating activities 266000

Cash flow from investing activities

Proceeds from sale of marketable securities 56000

Proceeds from sale of PPE 452000

Net cash flow from investing activities 508000

Cash flow from financing activities

Proceeds from notes receivable 16000

Repayments for notes payable   (10000)

Proceeds from Common stock 180000

Payment of dividends(net inc-(closing bal of re- opening bal of retained earnings) 120000

Net cash flow from financing activities 306000

Net cash flows 1080000