The two independent cases are listed below: Case ACase B Year 2Year 1Year 2Year 1Sales Revenue$ 11,400$ 9,400$ 23,000$ 18,400Cost of Goods Sold6,2005,70012,80011,200Gross Profit5,2003,70010,2007,200Depreciation Expense1,0401,0401,5401,540Salaries and Wages Expense2,7002,0405,4005,040Net Income$ 1,460$ 620$ 3,260$ 620Accounts Receivable$ 320$ 420$ 770$ 620Inventory770520770820Accounts Payable840740820890Salaries and Wages Payable1,4001,240220270 Required:Compute the net cash flow from operating activities section of the Year 2 statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

The objective of the question is to calculate the net cash flow from operating activities for the year 2 using the direct method. The direct method of preparing the cash flow statement presents the specific cash flows associated with items that affect cash flow. Items that typically do so include: Cash collected from customers, Interest and dividends received, Cash paid to employees, Cash paid to suppliers, Interest paid, Income taxes paid.For Case A, we start by calculating the cash received from customers. This is done by subtracting the increase in accounts receivable from sales revenue. In this case, it's $11,400 - ($320 - $420) = $11,500.Next, we calculate the cash paid to suppliers. This is done by adding the increase in inventory and subtracting the increase in accounts payable to the cost of goods sold. In this case, it's $6,200 + ($770 - $520) - ($840 - $740) = $6,360.Then, we calculate the cash paid to employees. This is done by subtracting the increase in salaries and wages payable from the salaries and wages expense. In this case, it's $2,700 - ($1,400 - $1,240) = $2,540.Finally, we subtract the cash paid to suppliers and the cash paid to employees from the cash received from customers to get the net cash flow from operating activities. In this case, it's $11,500 - $6,360 - $2,540 = $2,600.For Case B, we follow the same steps. First, we calculate the cash received from customers, which is $23,000 - ($770 - $620) = $22,850.Next, we calculate the cash paid to suppliers, which is $12,800 + ($770 - $820) - ($820 - $890) = $12,850.Then, we calculate the cash paid to employees, which is $5,400 - ($220 - $270) = $5,350.Finally, we subtract the cash paid to suppliers and the cash paid to employees from the cash received from customers to get the net cash flow from operating activities. In this case, it's $22,850 - $12,850 - $5,350 = $4,650.The net cash flow from operating activities for Case A in Year 2 is $2,600 and for Case B in Year 2 is $4,650. These values are calculated using the direct method of cash flow statement preparation, which involves calculating the cash received from customers and subtracting the cash paid to suppliers and employees.

Answered: The two independent cases are listed…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

	Case A	Case B
	Year 2	Year 1	Year 2	Year 1
Sales Revenue	$ 11,400	$ 9,400	$ 23,000	$ 18,400
Cost of Goods Sold	6,200	5,700	12,800	11,200
Gross Profit	5,200	3,700	10,200	7,200
Depreciation Expense	1,040	1,040	1,540	1,540
Salaries and Wages Expense	2,700	2,040	5,400	5,040
Net Income	$ 1,460	$ 620	$ 3,260	$ 620
Accounts Receivable	$ 320	$ 420	$ 770	$ 620
Inventory	770	520	770	820
Accounts Payable	840	740	820	890
Salaries and Wages Payable	1,400	1,240	220	270