Question

U V W X Name: Chapter 11 - Part 1 (Practice) к 1 M м NE Principles of Financial Accounting (ACC 221) Winter 2020 1. Based on the following information for XYZ, Inc., prepare the operating section of the statement of cash flows for 2021: $ 28,500,000 995,500 29,495,500 Current assets Accounts receivable Inventory Prepaid rent Increase of: Decrease of Increase of 1,450,000 2,275,000 1,200,000 9 Revenues Gain/ (loss) on sales of assets Total revenues Expenses: Cost of goods sold Operating expenses Depreciation expense Total expenses Net Income 19,500,000 7,500,000 1,750,000 28,750,000 745,500 Current liabilities Accounts payable Interest payable Increase of Increase of Decrease of 985,000 150,500 272,500 $ Income tax payable XYZ, Inc. Statement of Cash Flows Begin with net income: 19 20 21 1. Add back depreciation: 2 Remove gains & losses: 3. Adjust for changes: Net cash from operations: $ . 2020 $ 20 2 Based on the following information for ABC, Inc., prepare the operating section of the statement of cash flows for 2021: 2021 31 Revenues 2,705,996 Current assets Loss on sale of equipment (13,250) Accounts receivable 87,600 Total revenues 2,692,745 Inventory 151,000 Expenses: Prepaid rent 24,507 Cost of goods sold 1,575,000 Operating expenses 854,000 Current liabilities Depreciation expense 31,075 Accounts payable 54,065 Total expenses 2,460, 075 Accrued liabilities 20,995 39 Net Income Income tax payable 18,101 85,100 162,500 15,000 58,000 18,075 21,000 232,670 $ ABC, Inc. Statement of Cash Flows Begin with net income: 44 45 1. Add back depreciation: 2 Remove gains & losses: 3. Adjust for changes: ES Soom Net cash from operations: S

please follow the form

Answer 1

Pae No. I Bolution XYZ lue, $tatement of Cauhflows (im $2 Net Income. 7,45,500 Add : Depsiciation 17,50,00O 24,95,500 Adjuat for changes a) Accoms reeeivables ( Iucaeax) 6) Inventry (14,50,000) 22,75,000 Coucase) (12,00.000) E) prupand Rent (Juercane) 9,85,000 d) Accomts payable Canceae) 1, 50,500 e) Iutuest payables (Inueave) (9,95, 500) ) Gain en Aeset. 22,60, S00 Net Cash from opuations :

Page No.2 ABC, Inc. ftakemen casnflous for the peaiod 2021 (im $) Net lnome.. 2,32,670 Add: Depreeiation 31,075 2, 63,745 Adjut for changed C2, 500) ) Accomts reeeivable (Incemed from 2020) ) Inventory (DeneAsd fonm 2020) O prepaid Rent (Ineeased from 2020) d) Accout paybe (deeaed from 2020) 11,500 (9.507) ( 3,935) e) Acceded liabilities CIncased from 2020) hors on Bale f 2,9 20 13,250 Equipment: Net Cash from opuatione: 2, 75, 473


Summary:
Operating Cash Flows can be calculated by using two methods viz Direct Method & Indirect Method, Direct Method can be used only when complete information pertaining to every account is available but Indirect Method can be used when Income Statement along with Increase/Decreases of Assets and Liabilities given, In given question we can use indirect method only

To make it easy to understand, Increase in Asset is outflow of cash, Decrease in Asset is Inflow of cash accordingly reduce or add and it is vice versa for liabilities