Chapter 12, Problem 12.4AP

To determine

Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

1. A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.
2. B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To Prepare: Operating activities section of statement of cash flows using direct method.