Concept explainers
Computing
Refer to the information in PA12-2.
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
To prepare: cash flows from operating activities section ofthe statement of cash flows for the current year ended December 31 using the direct method.
Explanation of Solution
Statement of cash flows
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Prepare the statement of cash flows of Company DP for the year ended December 31, under direct method.
Company DP | ||
Statement of Cash Flows (Direct Method) | ||
For the year ended December 31 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Refer to Table (2) | ||
Cash received from customers (2) | 48,620 | |
Cash paid to suppliers(3) | (21,260) | |
Cash paid for salaries and wages payable (4) | (8,960) | |
Cash paid for rent(5) | (4,505) | |
Cash paid for insurance(6) | (1,897) | |
Cash paid for utilities expense(7) | (1,395) | |
Cash paid for interest expense | (1,800) | |
Net cash flow from operating activities | 8,803 |
Table (1)
Working Note:
Determine the changes in current assets and Liabilities.
Schedule of changes in current assets and liabilities | |||
Particulars | Amount $ | ||
Ending Balances | Beginning Balances | Increase/ (Decrease) | |
Accounts receivable | 560 | 580 | (20) |
Inventory | 990 | 770 | 220 |
Prepaid rent | 25 | 20 | 5 |
Prepaid insurance | 25 | 28 | (3) |
Accounts payable | 420 | 460 | (40) |
Salaries and wages payable | 100 | 60 | 40 |
Utilities Payable | 20 | 15 | 5 |
Table (2)
(1)
Determine the cash received from customers.
Determine the cash paid to suppliers.
Determine the cash paid for salaries and wages payable.
Determine the cash paid for rent expense.
Determine the cash paid for insurance expense.
Determine the cash paid for rent.
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Chapter 12 Solutions
Fundamentals Of Financial Accounting
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