Rooney Brands, Incorporated, presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Rooney's Year 2 and Year 1 year-end balance sheets. Assume that Accounts Payable is used for purchases of inventory only. Account Title Accounts receivable Merchandise inventory. Prepaid insurance Accounts payable Salaries payable Unearned service revenue The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income Year 2 $20,700 58,500 16,000 Required A Required B 23,400 4,650 900 $617,000 (372,000) 245,000 4,800 (40,000) (147,000) (5,000) 57,800 3,100 $60,900 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Complete this question by entering your answers in the tabs below. Net cash flow from operating activities Year 1 $29,000 51,400 26,600 18,800 ROONEY BRANDS, INCORPORATED Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 3,950 2,900 Prepare the operating activities section of the statement of cash flows using the direct method. Note: Cash outflows should be indicated with minus sign.
Rooney Brands, Incorporated, presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Rooney's Year 2 and Year 1 year-end balance sheets. Assume that Accounts Payable is used for purchases of inventory only. Account Title Accounts receivable Merchandise inventory. Prepaid insurance Accounts payable Salaries payable Unearned service revenue The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income Year 2 $20,700 58,500 16,000 Required A Required B 23,400 4,650 900 $617,000 (372,000) 245,000 4,800 (40,000) (147,000) (5,000) 57,800 3,100 $60,900 Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Complete this question by entering your answers in the tabs below. Net cash flow from operating activities Year 1 $29,000 51,400 26,600 18,800 ROONEY BRANDS, INCORPORATED Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 3,950 2,900 Prepare the operating activities section of the statement of cash flows using the direct method. Note: Cash outflows should be indicated with minus sign.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Rooney Brands, Incorporated, presents its statement of cash flows using the indirect method. The following accounts and
corresponding balances were drawn from Rooney's Year 2 and Year 1 year-end balance sheets. Assume that Accounts Payable is used
for purchases of inventory only.
Account Title
Accounts receivable
Merchandise inventory
Prepaid insurance
Accounts payable
Salaries payable
Unearned service revenue
The Year 2 income statement is shown below:
Income Statement
Sales
Cost of goods sold
Gross margin
Service revenue
Insurance expense
Salaries expense
Depreciation expense
Operating income
Gain on sale of equipment
Net income
Required A
Required B
Year 2
$20,700
58,500
16,000
23,400
4,650
900
$617,000
(372,000)
245,000
Required
a. Prepare the operating activities section of the statement of cash flows using the direct method.
b. Prepare the operating activities section of the statement of cash flows using the indirect method.
Cash flows from operating activities:
4,800
(40,000)
(147,000)
Complete this question by entering your answers in the tabs below.
Cash collections from customers for sales
Cash collections from customers for services
Cash payments for:
(5,000)
57,800
3,100
$60,900
Net cash flow from operating activities
ROONEY BRANDS, INCORPORATED
Statement of Cash Flows (Operating Activities)
For the Year Ended December 31, Year 2
Year 1
$29,000
51,400
26,600
18,800
Prepare the operating activities section of the statement of cash flows using the direct method.
Note: Cash outflows should be indicated with minus sign.
3,950
2,900
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