Question

In Chapter 2, Problem 8A

It says "cash used in operating activities (8,000)".

I don’t understand how to get to that number. I understand that I have to treat the purchase of supplies and the payment of accounts payable as operating expenses. But if i add the supplies and accounts payable it doesn’t equal $8,000.

How do i get to that number?

Thank you in advance,

Best,

Riccardo

Step 6 of 7 Cash received from revenues $5,500 Cash paid for expenses (4,000) Cash paid for accounts payable (8,500) Cash paid for supplies (1,000) Cash used in operating activities (8,000) Cash flows from investing activities None Cash flows from financing activities Cash received from scale of 30,000 Capital stock Increase in cash $22,000 Cash balance on oct.1.2007 7,400 Cash balance on oct,6,2007 $29,400

Answer 1

Cash from operating activities is the first section of cash flow statement. It represents the cash inflows or outflows from firm's core business activities. You have to consider both the Cash inflows and cash outflows related to company's core business activities to derive at cash used in operating activities. Particulars Cash Received From Revenues Less Cash Paid for Expenses Cash Paid to Accounts Payable Cash paid for Supplies Amount Amount $5,500 ($4,000) ($8,500) ($1,000) ($13,500 8,000 Cash used in operating Activities