Question

BIS 3590.000 Condowold Wages and other progexpenses $300.000 216.000 7 000 24.000 Depreciation expense... (547.000) Other pine Gain on rrement of Los on we open 12.000 40.000 70,000 4000 126.000 6.000 Assets Current Cash Accounts receivable..... Merchandise inventory Prepaid expenses Tocal current Long-term se Pentate Accumulated depreciation Toral Liabilities Current abilities Accounts payable....... 167 000 income we expense. Net income 210.000 148000 $288.000 $357.000 35.000 $40.000 40 Income esperable... Tocal current e s Long-term not able 60.000 90.000 150 000 12.000 56.000 64,000 120.000 Equity Common stock Recained earning 95.000 112.000 10.000 16.000 Tools and 207 000 5.357.000 000 $288.000 Additional Information The accounts payable balances result from merchandise inventory purchases 1. Purchased $70,000 in plant assets by paying $10.000 cash and issuing 560,000 of notes payable. .. Sold plant assets with an original cost of $30,000 and accumulated depreciation of $12.000 for $12,000 cash, yielding a $6,000 loss 1. Received SI5.000 cash from issuing 3.000 shares of common stock 5. Paid $18.000 cash to retire notes with a $34.000 book value, yielding a $16.000 gain. f. Declared and paid cash dividends of $14,000 Required: 1. Prepare the Cash accordey to the Flow Statement direct method.

Answer 1

Cash Flow Statement

Cash Flow from Operating Activities

Cash receipt from Customers $570,000

Payment made to Supplier ($337,000)

Wages and Operating Expenses paid ($218,000)

Cash generated from Operations $15,000

Interest Expense paid ($8,000)

Income taxes paid ($5,000)

Net Cash from Operating Activities(A) $2,000

Cash flow from Investing Activities

Purchase of Plant in Cash ($10,000)

Sale of Plant $12,000

Net Cash from Investing Activities(B) $2,000

Cash flow from Financing Activities

Proceeds from Issue of Common Stock $15,000

Dividends paid in cash ($14,000)

Net Cash from Financing Activities(C) $1,000

Net Cash Increase in Cash(A+B+C) $5,000

Cash in the beginning $12,000

Cash at the end $17,000

Working notes:

1.Calculation of Cash receipt from customers = Sales + Opening Accounts Receivable - Closing Accounts Receivable

= $590,000 + $40,000 - $60,000 = $570,000

2.Calculation of purchase

Cost of Goods sold = Opening Inventory + Purchase - Closing Inventory

$300,000 = $70,000 + Purchase - $84,000

Purchase =$300,000 + $84,000 - $70,000 = $314,000

3.Calculation of Payment made to Supplier

= Purchase + Opening Accounts Payable - Closing Accounts Payable + Notes retired by paying Cash

= $314,000 + $40,000 - $35,000 + $18,000 = $337,000

4.Calculation of Wages and Operating Expenses paid

Expenses during the year + Closing Prepaid Expense - Opening Prepaid Expense

= $216,000 + $6,000 - $4,000 = $218,000

5.Calculation of Interest Expenses paid

Interest expense during the year + Opening Interest Payable - Closing Interest Payable

= $7,000 + $4,000 - $3,00 = 8,000

6.Calculation of Income Taxes paid

= Income tax expense during the year + Opening Income tax Payable - Closing Income tax payable

$15,000 + $12,000 - $22,000 = $5,000