# The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $753,500 and accounts receivable decreased by$48,400 during the year, what was the amount of cash received from customers? b. If income tax expense for the current year was $50,600 and income tax payable decreased by$5,500 during the year, what was the amount of cash payments for income taxes? c. Briefly explain why the cash received from customers in (a) is different from sales.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 16, Problem 19E
Textbook Problem
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## The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: Â Â Â Â Â Â  a.Â Â Â Â Â Â Â Â Â Â Â  If sales for the current year were $753,500 and accounts receivable decreased by$48,400 during the year, what was the amount of cash received from customers? Â Â Â Â Â  b.Â Â Â Â Â Â Â Â Â Â Â  If income tax expense for the current year was $50,600 and income tax payable decreased by$5,500 during the year, what was the amount of cash payments for income taxes? Â Â Â Â Â Â  c.Â Â Â Â Â Â Â Â Â Â Â  Briefly explain why the cash received from customers in (a) is different from sales.

a.

To determine

Determine amount of cash received from customers.

### Explanation of Solution

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: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid.

Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments.

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...

b.

To determine

Determine the amount of cash payments for income taxes.

c.

To determine

Explain why the cash received from customers is different from sales.

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