Explanation Prepare the statement of cash flows for the year ended June 30, 2018 (Using direct method). A Services, Incorporation Statement of Cash Flows Year Ended June 30, 2018 Cash flows from operating activities: Cash receipts: Collections from customers 290,000 Dividends received 10,000 Total cash receipts 300,000 Cash payments: To suppliers (119,000) To employees (73,000) For income tax (14,000) For interest (3,000) Total cash payments (209,000) Net cash provided by operating activities 91,000 Cash flows from investing activities: Acquisition of fixed assets (85,000) Proceeds from sale of land 21,000 Net cash used for investing activities (64,000) Cash flows from financing activities: Proceeds from issuance of common stock 34,000 Payment of long-term notes payable (17,000) Payments of dividends (11,000) Net cash provided by financing activities 6,000 Net increase in cash 33,000 Cash balance, June 30, 2017 28,000 Cash balance, June 30, 2018 $61,000 Table (1) Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period. Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments. Direct method: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid. The below table shows the way of calculation of cash flows from operating activities using direct method: Cash flows from operating activities (Direct method) Add: Cash receipts. Cash receipt from customer Less: Cash payments: To supplier Interest expense For operating expenses Income tax expenses Net cash provided from or used by operating activities Table (2) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows...

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Author: Kemp

Publisher: PEARSON CO

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Chapter 11, Problem 28BE

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Chapter 11 Solutions

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Prepare the statement of cash flows for the year ended June 30, 2018 (using direct method).

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