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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Belnap Company has provided the following partial comparative balance sheets and the income statement for 20X2.

Chapter 14, Problem 31BEB, Belnap Company has provided the following partial comparative balance sheets and the income , example  1

Chapter 14, Problem 31BEB, Belnap Company has provided the following partial comparative balance sheets and the income , example  2

 Required:

Compute operating cash flows using the direct method.

To determine

Calculate the operating cash flows with the use of direct method.

Explanation

Cash Flows from Operating Activities:

This category of a cash flow statement shows the operational and profit generating activities in a firm. The operating cash flows increase or decrease the current assets and current liabilities of a firm.

The calculation of operating cash flows using direct method is shown in table below:

Operating Cash Flows
ParticularsIncome statement ($)Adjustments ($)Cash flows ($)
Revenues480,00027,4001507,400
Gain on sale of equipment20,000(20,000) 
Cost of goods sold(260,000)(25,000)2 
  (26,000)3(311,000)
Depreciation expense(50,000)50,000 
Interest expense(10,000) (10,000)
Net income180,000  
        Net cash from operating activities  186,400

Table (1)

Therefore, net cash flow from operating activities is $186,400.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($112,600$140,000)=$27,400

2

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