
Prepare the cash provided or used from operating activities using direct method.

Explanation of Solution
Statement of
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.
C Incorporation | ||
Statement of Cash Flows- Direct Method (Partial) | ||
For the year ended December 31, 2015 | ||
Details | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Cash receipt from customer | 498,000 | |
Less: Cash payments: | ||
Payment for inventory | 310,000 | |
Payment for other expenses | 86,300 | |
Payment for taxes | 18,500 | 414,800 |
Net cash provided by operating activities | $83,200 |
Table (1)
Working notes:
The amount of cash receipts from customers.
Step 1: Calculate the change in
Step 2: The Calculate the amount of cash receipts from customers.
Determine the cash paid for other expenses during 2015.
Step 1: Calculate the change in wages payable and prepaid expenses:
Schedule in the changes of assets and liabilities | |||
Particulars | Amount | ||
Current year (December 31, 2015) (1) |
Previous year (December 31, 2014) (2) |
Increase/ | |
Wages payable | $9,000 | $5,000 | $4,000 |
Prepaid expense | $5,400 | $4,200 | $1,200 |
Table (2)
Step 2: The Calculate the amount of cash paid for other expenses
Calculate the amount of cash paid for income taxes:
Step 1: Calculate the change in income taxes:
Step 2: The Calculate the amount of cash paid for income taxes.
Hence, the cash provided or used from operating activities using direct method is $83,200.
Want to see more full solutions like this?
Chapter 12 Solutions
Financial Accounting Fundamentals:
- The standard cost of Wonder Walkers includes 3 units of direct materials at $9.00 per unit. During July, the company buys 40,000 units of direct materials at $8.25 and uses those materials to produce 15,000 units. Compute the total, price, and quantity variances for materials.arrow_forwardBranson paid $465,000 cash for all of the outstanding common stock of Wolfpack, Incorporated, on January 1, 2023. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and retained earnings of $140,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $100,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $50,000 if Wolfpack's income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $35,000. On December 31, 2023, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $40,000. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Dividends Declared Year Net Income $ 65,000…arrow_forwardAnswer? ? Financial accounting questionarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





