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A.
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.
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.
Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.
Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Direct method) |
Add: Cash receipts. |
Cash receipt from customer |
Less: Cash payments: |
To supplier |
For operating expenses |
Income tax expenses |
Net cash provided from or used by operating activities |
To Determine: The amount of cash received from customers.
B.
The amount of cash payments for income taxes.
C.
To Explain: Why the cash received from customers is different from sales.
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Chapter 13 Solutions
Financial & Managerial Accounting
- Financial accountingarrow_forwardGiven the solution and accounting questionarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000.Sold merchandise to Abbey Corp; invoice amount, $36,000.Sold merchandise to Brown Company; invoice amount, $47,600.Abbey paid the invoice in (b) within the discount period.Sold merchandise to Cavendish Inc.; invoice amount, $50,000.Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods.Brown paid its account in full within the discount period.Sold merchandise to Decca Corporation; invoice amount, $42,400.Cavendish paid its account in full after the discount…arrow_forward
- Given solution general accountingarrow_forwardanswer plzarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
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