Question

Cash	68,000	22,000
Accounts Receivable	88,000	76,000
Inventory	167,000	189,000
Land	80,000	100,000
Equipment	260,000	200,000
Accumulated Depreciation	-66,000	-32,000
Total	597,000	555,000
Liabilities and Stockholders' Equity
Accounts Payable (for purchases of inventory)	39,000	43,000
Bonds Payable	150,000	200,000
Common Stock	216,000	174,000
Retained Earnings	192,000	138,000
Total	597,000	555,000
Additional Information
1.  Net income for 2022 was $93,000
2.  Depreciation expense was $34,000
3.  Cash dividends of $39,000 were declared and paid.
4.  Bonds payable amounting to $50,000 were redeemed for cash $50,000
5. Common stock was issued for $42,000 cash
6.  No equipment was sold during 2022.
7.  Land was sold for its book value.

B.  If you prepared Cash Flow from Operations (CFO) using the direct method, you would need to indicate cash inflows and outflows on a line-by-line basis.  

Provide the following amounts:

a.  Cash inflows from customers

b.  Cash payments for inventory

Answer 1

Under Direct method actual cash inflow and outflow from Customers are Consider instead of Adjusting income for cash flow .

Cash Flow from Operating Activity

Cah Inflow From Customer
Total Sales (Note 3)	149000
Less Credit Sales (Note 3)	(12000)
Cash flow from Customer		137000
Cash Payment for Inventory ( Note 4)		(4000)
Net Cash flow from Operating Activities		133000

Please Check note 3 for Credit Sales

Under Operating Activites , Cash floows relating to day to day business activities , such as sales , purchase , Expenses , which are part of income statement are comes under Operating Activities

1) Though Depreciation is part of Operating activites but it is just amortisation of Fixed Assets expenes , and it does not cause any cash outflow , where on purchase of Fixed assts it is comes under Investing Activities as Investment on Fixed Assets are Part of Investment Activites .

2) Dividend are for Sharehokder , Funds are raise from issue of Share , which are part of Financing activity , hence payment of Dividend are part of Financing Activity

3) Net Income = Total Sales - Cost of Goods Sold - Depreciation

Total Sales to Customer = Net Income + Depreciation + Cost of Goods Sold (Reduction in Inventory )

=93000+34000+22000

=149000

Total Sales = Cash sales + Credit Sales

Cash Sales = Total Sales - Credit Sales

Cash Sales = 149000-12000( Increse In Account Receivables )

=137000

4) CashPayment to Inventory = Decrease in Account Payable from Last yeat to Current

=43000-39000

=4000