Answered: Schedule for Calculation of Cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Schedule for Calculation of Cash Generated From Operating Activities

Horn Company's condensed income statement for the year ended December 31, 20-2, is shown.

Net sales		$1,220,000
Cost of goods sold		740,000
Gross profit		$480,000
Operating expenses		142,000
Operating income		$338,000
Other revenues and expenses:
Interest revenue	$420
Interest expense	(1,200)	(780)
Income before taxes		$337,220
Income tax expense		118,000
Net income		$219,220

Additional information obtained from Horn's comparative balance sheet and auxiliary records as of December 31, 20-2 and 20-1, is shown.

	20-2	20-1
Accounts receivable	$135,000	$122,600
Merchandise inventory	145,300	158,900
Accounts payable	45,000	87,100
Income tax payable	2,000	1,000
Supplies and prepayments	11,300	6,800
Accrued and withheld payroll taxes	2,750	3,700
Accrued interest receivable	90	210
Accrued interest payable	240	160

Depreciation expense for 20-2, included in operating expenses on the income statement, was $32,000.

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