![Financial And Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
A.
Prepare the
A.
![Check Mark](/static/check-mark.png)
Answer to Problem 21E
T Industries | ||
Statement of Cash Flows - Direct Method (Partial) | ||
Year Ended June 30 | ||
Details | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Add: Cash receipt: | ||
Cash received from customers | 522,760 | |
Total cash receipt | 522,760 | |
Less: Cash payments: | ||
Cash payment for merchandise | (302,400) | |
Cash payment for operating expenses | (99,960) | |
Cash payment for income taxes | (24,360) | |
Total cash payments | (426,720) | |
Net cash provided by operating activities | $96,040 |
Explanation of Solution
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: 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 |
Table (1)
Working notes:
Calculate the amount of cash received from customers:
Calculate the amount of cash paid for merchandise:
Calculate the amount of cash paid for operating expenses:
Calculate the amount of cash payments for income taxes.
Therefore, the net cash provided by operating activities under direct method is $96,040.
B.
Explain the Company’s cash flows from operating activities under direct method.
B.
![Check Mark](/static/check-mark.png)
Explanation of Solution
The direct method shows the
In the indirect method, adjusts the accrual basis net income for revenues and expenses. Thus, it does not involve the cash receipt or cash payment to arrive at cash flows from operating activities.
Want to see more full solutions like this?
Chapter 13 Solutions
Financial And Managerial Accounting
- The comparative balance sheet of Coulson, Inc. at December 31, 20Y2 and 20Y1, is as follows: The noncurrent asset, noncurrent liability, and stockholders equity accounts for 20Y2 are as follows: Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forwardThe comparative balance sheet of Whitman Co. at December 31, 20Y2 and 20Y1, is as follows: The noncurrent asset, noncurrent liability, and stockholders equity accounts for 20Y2 are as follows: Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forwardClassification of Cash Flows A company's statement of cash flows and the accompanying schedule of investing and financing activities not affecting cash may contain the following major sections: a. Operating Activities b. Investing Activities c. Financing Activities d. Investing and Financing Activities not Affecting Cash The following is a list of items that might appear on a company's statement of cash flows or in the accompanying schedule. Required: Using the letters A through D, indicate in which section of the statement of cash flows (or the accompanying schedule) the preceding item would most likely be classified. After each letter, indicate with a plus (+) or a minus () whether the item would be reported on the statement (or the accompanying schedule).arrow_forward
- Preparing a Statement of Cash Flows Volusia Company reported the following comparative balance sheets for 2019: Required: Prepare a statement of cash flows for Volusia using the indirect method to compute net cash flow from operating activities.arrow_forwardSpreadsheet and Statement of Cash Flows The following information was taken from Lambcrson Companys accounting records:arrow_forwardOn December 31, Harrison Company reports the following assets: Which of these are included in, and excluded from, cash on the companys balance sheet?arrow_forward
- Financial data for Otto Company follow: a. Compute the ratio of cash to monthly cash expenses. b. Interpret the results computed in (a).arrow_forwardThe following shows excerpts from Camole Companys statement of cash flows and other financial records. Compute the following for the company: A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioarrow_forwardUse the following information from Acorn Companys financial statements to determine operating net cash flows (indirect method).arrow_forward
- Use the following information from Jumper Companys financial statements to determine operating net cash flows (indirect method).arrow_forwardUse the following excerpts from Unigen Companys financial information to prepare the operating section of the statement of cash flows (indirect method) for the year 2018.arrow_forwardDuring the year, Hepworth Company earned a net income of 61,725. Beginning and ending balances for the year for selected accounts are as follows: There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows. Required: 1. Prepare a schedule of operating cash flows using the indirect method. 2. Suppose that all the data are used in Requirement 1 except that the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was 20,475. What is the ending balance of accounts payable? 3. CONCEPTUAL CONNECTION Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs 25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this years operating cash flows? If not, what would you suggest be done?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272124/9781337272124_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305088436/9781305088436_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)