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Portions of the financial statements for Hawkeye Company are provided below.
  

HAWKEYE COMPANY Income Statement For the Year Ended December 31, 2021 ($ in millions)
Sales				$	900
Cost of goods sold					350
Gross margin					550
Operating expenses:
Salaries	$	232
Depreciation		190
Loss on sale of land		12
Total operating expenses					434
Operating income					116
Other income (expense):
Gain on sale of cash equivalents					4
Interest expense					(40)
Income before tax					80
Income tax expense					40
Net income				$	40

   

HAWKEYE COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions)
	Year
	2021			2020			Change
Cash	$	212		$	200		$	12
Accounts receivable		395			421			(26)
Inventory		860			850			10
Accounts payable		210			234			(24)
Salaries payable		180			188			(8)
Interest payable		55			50			5
Income tax payable		90			104			(14)

Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

	Statement of Cash Flows (Direct Method - Partial)
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	Cash flows from operating activities
	Cash receipts from customers	$              926
	Cash paid to suppliers	$            -384
	Cash paid for Salary Expenses ( - $ 232 - $ 8)	$            -240
	Cash Paid for interest Expenses ( -40 + 5)	$              -35
	Cash Paid for Income taxes ( - 40 - 14)	$              -54
	Net cash from operating activities		$           213
	Working notes: 1
	Calculation of cash collection from customer
	Sales	$                    900
	Add: Opening AR	$                    421
	Less: Closing AR	$                    395
	Cash Collected	$                    926
	Working notes: 2
	Calculation of purhcase of inventory
	Cost of Goods Sold	$                    350
	Add: Closing inventory	$                    860
	Less : Opening Inventory	$                    850
	Material Purhcased	$                    360
	Calculation of amount paid to supplied
	Op. Balance of Acct Payable	$                    234
	Add: Purchases	$                    360
	Less: Cl. Balance of Account payable	$                    210
	Cash paid	$                    384