Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company. Direct method: This method uses the basis of cash for preparing the cash flows of statement. Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year. A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable. B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid. To Compute: Cash payments to suppliers under direct method.

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Chapter 12, Problem 12.12E

(a)

To determine

Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To Compute: Cash payments to suppliers under direct method.

(b)

To determine

To Compute: Cash payments to operating expenses under direct method.

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