2 Semester Cengage Now, Warren Accounting
2 Semester Cengage Now, Warren Accounting
26th Edition
ISBN: 9781305662308
Author: WARREN
Publisher: Cengage
Question
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Chapter 16, Problem 16.21EX

a.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

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

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

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

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Direct method)
Add: Cash receipts.
Cash receipt from customer
Less: Cash payments:
To supplier
For operating expenses
Income tax expenses
Net cash provided from or used by operating activities

The amount of cash paid for merchandise.

a.

Expert Solution
Check Mark

Answer to Problem 16.21EX

Cash paid for merchandise=[Cost of Goods Sold (+Decrease in Accounts Payable/Increase in InventoryORIncrease in Accounts Payable /Decrease in Inventory)]=(Cost of goods sold + Decrease in Accounts Payable Decrease in Inventory)=1,031,550+$9,660$15,410=$1,025,800

Therefore, the amount of cash paid for merchandise is $1,025,800.

Explanation of Solution

Working notes:

Calculate increase or decrease in merchandise inventories:

Increase or decrease inmerchandise inventories}=(Beginning balance - Ending balance)=($193,430$178,020)=$15,410(Decrease)

Calculate increase or decrease in accounts payable:

Increase or decrease in accounts payable}=(Beginning balance - Ending balance)=($105,800$96,140)=$9,660(Decrease)

Cash payments for purchase represents the total amount of cash paid for the purchase as well as to the accounts payable.

Therefore, the amount of cash paid for merchandise is $1,025,800.

b.

To determine

The amount of cash paid for operating expenses.

b.

Expert Solution
Check Mark

Answer to Problem 16.21EX

Cash paid for operating expenses}=[Operating expenses other than depreciation (+Decrease in accrued expense payable+Increase in prepaid expensesORIncrease in accrued expensetax payableDecrease in prepaid expenses)]=(Operating expenses other than depreciation+ Decrease in iaccrued expense payableDecrease in prepaid expenses)=($179,400+$1,380$1,610)=$179,170

Therefore, the amount of cash paid for operating expenses is $179,170.

Explanation of Solution

Working note:

Calculate increase or decrease in operating expenses / accrued expense payable:

Increase or decrease in operating expenses/accrued expense payable}=(Beginning balance - Ending balance)=($14,030$12,650)=$1,380(Decrease)

Calculate increase or decrease in prepaid expenses:

Increase or decrease in prepaid expenses}=(Beginning balance - Ending balance)=($8,970$7,360)=$1,610(Decrease)

Cash payments for accrued expense represent the total amount of cash paid for the operating expense, accrued expense payable and prepaid expenses.

Therefore, the amount of cash paid for operating expenses is $179,170.

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Chapter 16 Solutions

2 Semester Cengage Now, Warren Accounting

Ch. 16 - Prob. 16.1APECh. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Prob. 16.2APECh. 16 - Prob. 16.2BPECh. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Prob. 16.4APECh. 16 - Prob. 16.4BPECh. 16 - Prob. 16.5APECh. 16 - Land transactions on the statement of cash flows...Ch. 16 - Prob. 16.6APECh. 16 - Prob. 16.6BPECh. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Prob. 16.8BPECh. 16 - Prob. 16.1EXCh. 16 - Effect of transactions on cash flows State the...Ch. 16 - Prob. 16.3EXCh. 16 - Prob. 16.4EXCh. 16 - Cash flows from operating activities-indirect...Ch. 16 - Prob. 16.6EXCh. 16 - Prob. 16.7EXCh. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Prob. 16.10EXCh. 16 - Reporting land transactions on statement of cash...Ch. 16 - Prob. 16.12EXCh. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Prob. 16.15EXCh. 16 - Prob. 16.16EXCh. 16 - Prob. 16.17EXCh. 16 - Prob. 16.18EXCh. 16 - Prob. 16.19EXCh. 16 - Prob. 16.20EXCh. 16 - Prob. 16.21EXCh. 16 - Prob. 16.22EXCh. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Prob. 16.24EXCh. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Prob. 16.1APRCh. 16 - Statement of cash flowsindirect method The...Ch. 16 - Prob. 16.3APRCh. 16 - Statement of cash flows-direct method The...Ch. 16 - Prob. 16.5APRCh. 16 - Prob. 16.1BPRCh. 16 - Statement of cash flowsindirect method The...Ch. 16 - Prob. 16.3BPRCh. 16 - Statement of cash flows-direct method The...Ch. 16 - Prob. 16.5BPRCh. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...Ch. 16 - Prob. 16.4CP
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