Concept explainers
To prepare: The cash flow from operating activities section of statement of cash flows for Incorporation C under direct method.
Explanation of Solution
Statement of cash flows:
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.
The cash flow from operating activities Incorporation C for the year ended December 31, is as follows:
Incorporation C | ||
Statement of Cash Flows (Direct Method) | ||
For the year ended December, 31 | ||
Particulars | Amount | Amount |
Cash flows from operating activities: | ||
Cash received from customers (2) | $77,700 | |
Cash paid to suppliers (3) | ($36,040) | |
Cash paid for salaries and wage payable (4) | ($9,800) | |
Cash paid for rent expense (5) | ($2,480) | |
Cash paid for insurance expense (6) | ($1,280) | |
Cash paid for utilities expense (7) | ($900) | |
Cash paid for interest expense | ($1,200) | |
Net cash flows from operating activities | $26,000 |
Table (1)
Working note:
Prepare schedule of changes in current assets and liabilities:
Schedule of changes in current assets and liabilities | |||
Particulars | Amount | ||
Ending Balances (1) |
Beginning Balances (2) |
Increase/ (Decrease) |
|
Inventory | $430 | $490 | ($60) |
$1,800 | $1,500 | $300 | |
Prepaid rent | $80 | $100 | ($20) |
Prepaid Insurance | $70 | $90 | ($20) |
Accounts payable | $1,200 | $1,300 | ($100) |
Utilities payable | $100 | $0 | $100 |
Salaries and wages payable | 450 | 250 | 200 |
Table (2)
(1)
Determine the cash received from customers.
Determine the cash paid to suppliers.
Determine the cash paid for salary and wage expense.
Determine the cash paid for rent expense.
Determine the cash paid for insurance expense.
Determine the cash paid for utilities expense.
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Chapter 12 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
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