Question

Suppose your company sells goods for $300, of which $200 is received in cash and $100 is on account. The goods cost your company $125 and were paid for in a previous period. Your company also recorded salaries and wages of $70, of which only $30 has been paid in cash. Journal Entry: transaction list 1. Record the sales revenue of $200 for cash and $100 on account and record the cost of goods sold of $125 using one journal entry 2. Record the salaries and wages expense of $70. journal entry has been entered

2)

Calculate the amount that should be reported as net cash flow from operating activities. 3) Calculate the amount that should be reported as net income. 4) Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).

Answer 1

NO. Account Title Dr. (S) Cr. ($) 1 Cash 200 100 125 Accounts receivable COGS Sales revenue Invent 300 125 2 Salaries and wages exp. Salaries and wages payable 40 Part 2 - Amount to be reported as net cash flow from operating activitie Cash collected from sales Less:- cash paid for exp 200 170 Net income Sales revenue Less:- COGS Gross profit Less:- Salaries and wages exp. Net income 300 125 175 105 Net income Increase in A/R Decrease in inventory Inc. in sand wages payable 105 100 125 170

Helping tool-Formula for Cash flow from Operating Activities Net loss Add:- Depreciation Add:- Amortisation/loss 7Less: gain Operating Profit before WC Changes Add:- Decrease In Current Assets Add:- Increase in current Liabilities Less -Increase In Current Assets Less:- Decrease in current Liabilities Net Cash From Operating Activities