Sales .....$511,000Cost of merchandise sold290,500Gross profit ......Operating expenses:Depreciation expenseOther operating expensesTotal operating expenses$220,500$ 39,200.....105,000144,200$ 76,300Income before income tax21,700Income tax expense$ 54,600Net income ......Changes in the balances of selected accounts from the beginning to the end of thecurrent year are as follows:Increase(Decrease)Accounts receivable (net) .$(11,760)3,920Inventories .....Prepaid expensesAccounts payable (merchandise creditors)Accrued expenses payable (operating expenses)Income tax payable......(3,780)(7,980)1,260(2,660)

Question
Asked Dec 21, 2019
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The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Please see  the attachment for details:

a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the direct method.
b. What does the direct method show about a company’s cash flows from
operating activities that is not shown using the indirect method?

Sales .....
$511,000
Cost of merchandise sold
290,500
Gross profit ......
Operating expenses:
Depreciation expense
Other operating expenses
Total operating expenses
$220,500
$ 39,200
.....
105,000
144,200
$ 76,300
Income before income tax
21,700
Income tax expense
$ 54,600
Net income ..
....
Changes in the balances of selected accounts from the beginning to the end of the
current year are as follows:
Increase
(Decrease)
Accounts receivable (net) .
$(11,760)
3,920
Inventories .....
Prepaid expenses
Accounts payable (merchandise creditors)
Accrued expenses payable (operating expenses)
Income tax payable......
(3,780)
(7,980)
1,260
(2,660)
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Sales ..... $511,000 Cost of merchandise sold 290,500 Gross profit ...... Operating expenses: Depreciation expense Other operating expenses Total operating expenses $220,500 $ 39,200 ..... 105,000 144,200 $ 76,300 Income before income tax 21,700 Income tax expense $ 54,600 Net income .. .... Changes in the balances of selected accounts from the beginning to the end of the current year are as follows: Increase (Decrease) Accounts receivable (net) . $(11,760) 3,920 Inventories ..... Prepaid expenses Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) Income tax payable...... (3,780) (7,980) 1,260 (2,660)

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Expert Answer

Step 1

Cash flow statement: Cash flow statement is a main part of financial statement. It is prepared to find the ending cash balance from transactions of business. Inflow and outflow of cash transactions are recorded in cash flow statement. Cash flow statement can be prepared under two methods, i.e., direct method and indirect method. The transactions of business are classified under three categories in cash flow statement, those are cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.

Step 2

a. Prepare a statement of cash flow from operating activitie...

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Statement of cash flows (Direct method) Amount (S) Amount ($) Particulars Cash flows from operating activities: Add: Cash receipts Cash received from customers (S511,000+S11,760) Total cash receipts Less: Cash payments Cash payments for suppliers (S290,500+S3,920+S7,980) Cash payment for accrued expenses (S105,000-S3,780-S1,260) Cash payment for income taxes $522,760 S522,760 -S302,400 -$99,960 -$24,360 (S21,700+$2,660) Total cash payment Net cash provided by operating activities -$426,720 $96,040

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Cash Flow Statements

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