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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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The following financial statements were provided by Roberts Company:

Chapter 14, Problem 47P, The following financial statements were provided by Roberts Company: At the end of 20X2, Roberts , example  1

Chapter 14, Problem 47P, The following financial statements were provided by Roberts Company: At the end of 20X2, Roberts , example  2

At the end of 20X2, Roberts purchased some additional equipment for $20,000.

Required:

Calculate operating cash flows using the direct method.

To determine

Chart the net operating cash flows using the 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 cash flows from operating activities for R Company for 20X2 using direct method are shown below:

R Company
Statement of Cash Flow
For the year ended September 30, 20X2
ParticularsIncome statement ($)Adjustments ($)Cash flows ($)
Cash flows from operating activities:   
Revenues40,000(2,000)138,000
Cost of goods sold(28,800)(2,800)2-
  (1,600)3(27,600)
Wages expenses(4,000)4004(4,400)
Advertising(2,000) (2,000)
Depreciation expense(6,000)6,0005-
        Net cash from operating activities  4,000

Table (1)

Therefore, the net cash from operating activities is $4,000.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($9,600$7,600)=$2,000

2.

Calculation of difference in amount of inventories:

(DifferenceinInventories)=(AmountofInventoriesof20X2AmountofInventoriesof20X1)=($18,000$20,800)=$2,800

3

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