Pizza International, Inc., reported the following information (in thousands): Operating ActivitiesNet Income$780 Depreciation 33,405 Increase in receivables 190 Decrease in inventory 683 Increase in prepaid expenses 684 Decrease in accounts payable 8,740 Increase in accrued liabilities 739 Decrease in income taxes payable 2,761 Payments on notes payable 12,711 Cash paid for equipment 29,093 The following summarized income statement for Pizza International, Inc. (in thousands): Revenues$145,551 Cost of Sales 46,500 Gross Profit 99,051 Salary and Wages Expense 56,935 Depreciation 33,405 Office Expenses 7,801 Net Income before Income Tax Expense 910 Income Tax Expense 130 Net Income$780 Required:1. Based on this information, compute cash flow from operating activities using the direct method. Assume Prepaid Expenses and Accrued Liabilities relate to office expenses.2. What was the primary reason that Pizza International was able to report large positive cash flow from operations despite nearly having a net loss?

Given: Operating Activities Net Income $ 780 Depreciation 33,405 Increase in…

Answered: ncrease in receivables 190 Decrease…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 54P

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Question

Pizza International, Inc., reported the following information (in thousands):

Operating Activities
Net Income	$	780
Depreciation		33,405
Increase in receivables		190
Decrease in inventory		683
Increase in prepaid expenses		684
Decrease in accounts payable		8,740
Increase in accrued liabilities		739
Decrease in income taxes payable		2,761
Payments on notes payable		12,711
Cash paid for equipment		29,093

The following summarized income statement for Pizza International, Inc. (in thousands):


Revenues	$	145,551
Cost of Sales		46,500
Gross Profit		99,051
Salary and Wages Expense		56,935
Depreciation		33,405
Office Expenses		7,801
Net Income before Income Tax Expense		910
Income Tax Expense		130
Net Income	$	780

Required:

1. Based on this information, compute cash flow from operating activities using the direct method. Assume Prepaid Expenses and Accrued Liabilities relate to office expenses.

2. What was the primary reason that Pizza International was able to report large positive cash flow from operations despite nearly having a net loss?

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