Question

Required:
1. Provide the summary journal entry which shows the cash flow for each of the following for Mike Roe Computers during the reporting period: received from customers, paid to suppliers, paid to employees, paid for interest, paid for insurance, paid for income taxes.
2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).

MIKE ROE COMPUTERS Income Statement For the Year Ended December 31, 2018 Sales $150.40 (90.20 60.20 Cost of goods sold Gross margin Salaries expense Insurance expense Depreciation expense Interest expense Gains and losses: $20.40 12.40 5.20 6.20 (44.20) 12.40 (3.40) 25.00 (12.50) Gain on sale of equipment Loss on sale of land Income before tax Income tax expense $ 12.50 Net income Reconciliation of Net Income to Net Cash Flows from Operating Activities Net income Adjustments for noncash effects: Decrease in accounts receivable Gain on sale of equipment Increase in inventory Increase in accounts payable Increase in salaries payable Depreciation expense Decrease in bond discount Decrease in prepaid insurance Loss on sale ofland Increase in income tax payable Net cash flows from operating activities $ 12.50 5.20 (12.40) (6.20) 9.20 3.20 5.20 3.10 2.20 3.40 6.20 $ 31.60

Answer 1

ANSWER :-

Journal:
Received from customers		1)			2)
Sales	$    150.40
Add: Decrease in accounts receivable	$         5.20	Account Title & Explanations	Debit($)	Credit($)	Opearating Cash flow -Direct Method
Received from customers	$    155.60	Cash	$ 155.60		Collection from customers	$ 155.60
		Sales		$ 150.40	payment to suppliers	$ (87.20)
payment to suppliers		Accounts receivable		$       5.20	payment to employees	$ (17.20)
Cost of goods sold	$      90.20	(cash collected from customers)			payment for interest	$    (3.10)
Add: Increase in inventory	$         6.20				payment for insurance	$ (10.20)
Purchase	$      96.40	Merchandise inventory	$    96.40		payment for income tax	$    (6.30)
less: increase in accounts payable	$         9.20	Accounts payable		$       9.20	Cash flow from operating activities	$    31.60
payment to suppliers	$      87.20	cash		$    87.20
		(payment for purchase)
Paid to employees					(Figures are taken from working)
salaries expense	$      20.40	Salaries expense	$    20.40
Less: increase in salaries payable	$         3.20	Salary payable		$       3.20
Paid to employees	$      17.20	cash		$    17.20
		(paid to employees)
Paid for interest
Interest expense	$         6.20	Interest expense	$      6.20
Less: decrease in bond discount	$         3.10	Discount on bonds payable		$       3.10
(amortization of bond discount increases		Cash		$       3.10
the interest EXPENSE)		(paid for interest)
Payment for interest	$         3.10
		Insurance expense	$    12.40
paid for insurance		prepaid insurance		$       2.20
insurance expense	$      12.40	cash		$    10.20
Less: decrease in prepaid insurance	$         2.20	(paid for insurance)
paid for insurance	$      10.20
		Income tax expense	$    12.50
paid for income tax		Income tax payable		$       6.20
income tax expense	$      12.50	cash		$       6.30
Less: increase in income tax payable	$         6.20	(paid for income tax)
paid for income tax	$         6.30

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