Explanation Operating Activities Section: The activities which accounts for daily operating transactions results in cash inflows as well as outflows are referred to as the operating activities section. The cash flows in the operating activities exists mainly from the production and distribution of commodities produced in an economy. The cash flow statement as per the direct method is given below: L.L. Company Cash Flow Statement – Direct Method For the year ended December 31 Operating Activities Cash collected from customers $53,500 Cash paid for merchandise ($37,000) Cash paid to other suppliers ($11,450) Cash paid for interest ($2,100) Cash investment income received $634 Cash paid for taxes ($2,284) Net cash provided by operating activities $1,300 Table (1) The table given above depicts various components that help to evaluate the total value of net cash by all the operating activity that is calculated as $1,300. Footnote: The calculation of cash received from customers is given below: Cash Collected from Customers During the Year Particulars Amount ($) Sales $56,000 Less: Increase in Accounts Receivable ($2,500) Cash collected from Customers $53,500 Table (2) The calculation of cash paid for merchandise is given below: Cash Paid for Merchandise Particula...

3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Chapter 22, Problem 22.5BE

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To prepare: The operating activities section of the cash flow statement using the direct method.

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