Question

Presented below is the 2021 income statement and comparative balance sheet information for Tiger Enterprises.

TIGER ENTERPRISES
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Sales revenue								$	7,660
Operating expenses:
Cost of goods sold		$	3,470
Depreciation expense			350
Insurance expense			210
General and administrative expense			1,910
Total operating expenses									5,940
Income before income taxes									1,720
Income tax expense									(710	)
Net income								$	1,010
Balance Sheet Information ($ in thousands)	Dec. 31,2021						Dec. 31, 2020
Assets:
Cash		$	410					$	310
Accounts receivable			860						940
Inventory			750						710
Prepaid insurance			105						75
Equipment			2,650						2,350
Less: Accumulated depreciation			(1,060	)					(710	)
Total assets		$	3,715					$	3,675
Liabilities and Shareholders' Equity:
Accounts payable		$	410					$	470
Accrued liabilities (for general & administrative expense)			410						510
Income taxes payable			310						260
Notes payable (due 12/31/2022)			910						710
Common stock			1,010						910
Retained earnings			665						815
Total liabilities and shareholders' equity		$	3,715					$	3,675

Required:
Prepare the cash flows from operating activities section of Tiger's 2021 statement of cash flows using the direct method. Assume that all purchases and sales of inventory are on account, and that there are no anticipated bad debts for accounts receivable

Answer 1

TIGER ENTERPRISES Statement of Cash Flows For the year ended December 31, 2021 Direct Method ($ in thousands) Cash flows from operating activities Cash collected from customers $7,740 Cash paid for supplies -$3,570 Cash paid for General and administrative expense -$2,010 Cash paid for insurance expense -$240 Cash paid for income tax -$660 Net cash provided by operating activities $1,260 Workings: Calculation : Cash collected from customers Beginning AR + Sales - Ending AR $940 $7.660 -S860 $7.740 Payment of dividend: Beginning retained earnings Add: Net Income Less: Ending retained earnings S815 $1,010 $665 $1,160 -$75 Purchase from suppliers - Beginning Inventory + cost of goods sold + Ending Inventory Cash paid for Insurance expenses: - Beginning prepaid insurance + Insurance expense + Ending prepaid insurance -$710 $3,470 $750 $3,510 $210 $105 $240 Cash flows from investing activities Purchase of equipment Net cash used by investing activities -$300 -$300 Cash paid for suppliers Beginning AP + purchase from suppliers - Ending AP Cash paid for Income tax expense Beginning Income tax payable + Income tax expenses - Ending Income tax payable $470 $3.510 -$410 $3,570 Cash flows from financing activities Issued of note payable Issued of common stock Payment of dividend Net cash provided by financing activities $260 $710 -$310 $660 $200 $100 -$1.160 -$860 Cash paid for operating expenses: + Beginning Accrued liabilities + General and administrative expenses - Ending Accrued liabilities $100 Net increase in cash Add: beginning cash and cash equivalent Ending cash and cash equivalent $510 $1.910 -$410 $2.010 $3101 $410