Financial & Managerial Accounting
Financial & Managerial Accounting
14th Edition
ISBN: 9781337515498
Author: WARREN
Publisher: Cengage
Question
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Chapter 13, Problem 13.20EX

A.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

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

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 paid for merchandise.

A.

Expert Solution
Check Mark

Answer to Problem 13.20EX

Cash paid for merchandise=[Cost of Goods Sold (+Decrease in Accounts Payable/Increase in InventoryORIncrease in Accounts Payable /Decrease in Inventory)]=(Cost of goods sold + Decrease in Accounts Payable Decrease in Inventory)=1,031,550+$9,660$15,410=$1,025,800

Explanation of Solution

Working notes:

Calculate increase or decrease in merchandise inventories:

Increase or decrease inmerchandise inventories}=(Beginning balance - Ending balance)=($193,430$178,020)=$15,410(Decrease)

Calculate increase or decrease in accounts payable:

Increase or decrease in accounts payable}=(Beginning balance - Ending balance)=($105,800$96,140)=$9,660(Decrease)

Cash payments for purchase represents the total amount of cash paid for the purchase as well as to the accounts payable.

Therefore, the amount of cash paid for merchandise is $1,025,800.

B.

To determine

The amount of cash paid for operating expenses.

B.

Expert Solution
Check Mark

Answer to Problem 13.20EX

Cash paid for operating expenses}=[Operating expenses other than depreciation (+Decrease in accrued expense payableIncrease in prepaid expensesORIncrease in accrued expensetax payableDecrease in prepaid expenses)]=(Operating expenses other than depreciation+ Decrease in accrued expense payableDecrease in prepaid expenses)=($179,400+$1,380$1,610)=$179,170

Therefore, the amount of cash paid for operating expenses is $179,170

Explanation of Solution

Working note:

Calculate increase or decrease in operating expenses / accrued expense payable:

Increase or decrease in operating expenses/accrued expense payable}=(Beginning balance - Ending balance)=($14,030$12,650)=$1,380(Decrease)

Calculate increase or decrease in prepaid expenses:

Increase or decrease in prepaid expenses }=(Beginning balance - Ending balance)=($8,970$7,360)=$1,610(Decrease)

Cash payments for accrued expense represent the total amount of cash paid for the operating expense as well as to the accrued expense payable.

Therefore, the amount of cash paid for operating expenses is $179,170/

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Chapter 13 Solutions

Financial & Managerial Accounting

Ch. 13 - Classifying cash flows Identify whether each of...Ch. 13 - Prob. 13.2BECh. 13 - Prob. 13.3BECh. 13 - Prob. 13.4BECh. 13 - Land transactions on the statement of cash flows...Ch. 13 - Common stock transactions on the statement of cash...Ch. 13 - Prob. 13.7BECh. 13 - Prob. 13.8BECh. 13 - Prob. 13.1EXCh. 13 - Effect of transactions on cash flows State the...Ch. 13 - Classifying cash flows Identify the type of cash...Ch. 13 - Prob. 13.4EXCh. 13 - Prob. 13.5EXCh. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Prob. 13.8EXCh. 13 - Reporting changes in equipment on statement of...Ch. 13 - Prob. 13.10EXCh. 13 - Determining cash payments to stockholders The...Ch. 13 - Prob. 13.12EXCh. 13 - Reporting land acquisition for cash and mortgage...Ch. 13 - Prob. 13.14EXCh. 13 - Prob. 13.15EXCh. 13 - Prob. 13.16EXCh. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method List the...Ch. 13 - Prob. 13.19EXCh. 13 - Prob. 13.20EXCh. 13 - Cash flows from operating activities direct method...Ch. 13 - Prob. 13.22EXCh. 13 - Prob. 13.1APRCh. 13 - Prob. 13.2APRCh. 13 - Prob. 13.3APRCh. 13 - Prob. 13.4APRCh. 13 - Statement of cash flows direct method applied to...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows indirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows direct method The...Ch. 13 - Statement of cash flowsdirect method applied to PR...Ch. 13 - Prob. 1ADMCh. 13 - Prob. 2ADMCh. 13 - Prob. 3ADMCh. 13 - Priceline: Free cash flow Priceline Group, Inc. is...Ch. 13 - Prob. 13.1TIFCh. 13 - Prob. 13.3TIF
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