Question

The income statement and selected balance sheet information for Direct Products Company for the year ended December 31, 2017 are as follows: $48, 600 Income Statement Sales Revenue Expenses: Cost of Goods Sold Depreciation Expense Salaries Expense Rent Expense Insurance Expense Interest Expense Utilities Expense 21,000 2,000 9,000 4,500 1,900 1, 800 1,400 Net Income $ 7,000 Selected Balance Sheet Accounts 2017 Accounts Receivable $ 560 Merchandise Inventory 990 Accounts Payable 440 Prepaid Rent 25 Prepaid Insurance Salaries Payable Utilities Payable 2016 $ 580 770 460 20 28

Answer 1

Solution

Direct Products Company
Cash Flow Statement
For year ended 31st December , 2017
A. Cash Flows from Operating Activity
Net Income		$     7,000.00
Adjustments to reconcile net income to net cash from operations
Depreciation expense	$     2,000.00
Decrease in Accounts receivables	$           20.00
Decrease in Accounts Payable	$         (20.00)
Increase in Prepaid Rent	$           (5.00)
Increase in Inventory	$      (220.00)
Decrease in Prepaid Insurance	$             3.00
Increase in Salaries Payable	$           30.00
Increase in Utilities Payable	$             5.00
		$     1,813.00
Net cash flow from Operating activities		$     8,813.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.