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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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Oliver Company provided the following information for the years 20X1 and 20X2:

Chapter 14, Problem 40E, Oliver Company provided the following information for the years 20X1 and 20X2: Refer to the , example  1

Chapter 14, Problem 40E, Oliver Company provided the following information for the years 20X1 and 20X2: Refer to the , example  2

Refer to the information for Oliver Company above and on the previous page.

To determine

Construct a schedule showing 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 schedule showing the operating cash flows using direct method is shown in table below:

Operating Cash Flows
ParticularsIncome statement ($)Adjustments ($)Cash flows ($)
Revenues75,000(3,800)171,200
Cost of goods sold(20,000)2,0002 
  1,4003(16,600)
Depreciation expense(2,000)2,000 
Other expense(13,000) (13,000)
Net income900,000  
        Net cash from operating activities  41,600

Table (1)

Therefore, net cash flow from operating activities is $41,600.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($9,200$5,400)=$3,800

2

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