Prepare the operuting activites section of the business's statement of cash fows for the year ended June 30, 2016, using the direct method. (Use a minus sign orparenthoses to show net cash used for operating activites. Ifa box is not used in the statement, leave the box empty, do not select a label or enter aere)Stella's Learning CenterData TableStatement of Cash Flows (Partial)Year Ended June 30, 2016Cash Flows from Operating ActivitiesPayments to suppliers$ 119,000ReceiptsCash payment for purchase of equipment30,000Payments to employees66.000Payment of notes payable33,000Total Cash ReceiptsPayment of dividends4,500PaymentsCash receipt from isuance of stoc20,000Collections from customers187,000Cash receipt from sale of land50,000Cash balance, June 30, 201532,000Choose from any list or enter any number in the input fields and then click Check AnswerPrintDone

Answered: Prepare the operuting activites section…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 49E: Preparing a Statement of Cash Flows-Direct Method The controller of Newstrom Software Inc. provides...

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Question

Prepare the operuting activites section of the business's statement of cash fows for the year ended June 30, 2016, using the direct method. (Use a minus sign or
parenthoses to show net cash used for operating activites. Ifa box is not used in the statement, leave the box empty, do not select a label or enter aere)
Stella's Learning Center
Data Table
Statement of Cash Flows (Partial)
Year Ended June 30, 2016
Cash Flows from Operating Activities
Payments to suppliers
$ 119,000
Receipts
Cash payment for purchase of equipment
30,000
Payments to employees
66.000
Payment of notes payable
33,000
Total Cash Receipts
Payment of dividends
4,500
Payments
Cash receipt from isuance of stoc
20,000
Collections from customers
187,000
Cash receipt from sale of land
50,000
Cash balance, June 30, 2015
32,000
Choose from any list or enter any number in the input fields and then click Check Answer
Print
Done

Expert Solution

Introduction

The direct method is one of two accounting treatments used to generate a cash flow statement. The statement of cash flows direct method uses actual cash inflows and outflows from the company's operations, instead of modifying the operating section from accrual accounting to a cash basis. Accrual accounting recognizes revenue when it is earned versus when the payment is received from a customer.

Conversely, the cash flow direct method measures only the cash that's been received, which is typically from customers, and the cash payments or outflows, such as to suppliers. The inflows and outflows are netted to arrive at the cash flow. The direct method is also known as the income statement method.