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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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(Appendix 21.1) Operating Cash Flows Refer to the information for Lamberson Company in P21-6.

Required:

  1. 1. Using the direct method, prepare the operating activities section of the 2019 statement of cash flows for Lamberson.
  2. 2. (Optional). If you completed P21-6 earlier, prepare the remaining portion of the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)

To determine

Prepare the operating activities section under direct method of L Company for the year 2019.

Explanation

Statement of cash flows: Cash flow statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

Operating Activities: Operating activities include cash inflows and outflows from business operations.

Prepare the operating activities section under direct method:

L Company
Statement of cash flows for the year, 2019
ParticularsAmount($)Amount($)
Operating Activities:  
Cash inflows: 
Collection from customers(Working note 1)40,040 
Dividends collected820 
Cash inflows from operating activities 40,860
Cash outflows: 
Payments to suppliers(Working note 2)(19,350) 
Payment to employees(Working Note 3)(11,450) 
Other operating payments(Working Note 4)(1,410) 
Payments of income taxes (Working Note 5)(1,550) 
Cash outflows for operating activities (33,760)
Net cash provided by operating activities 7,100

Table (1)

Working note 1: Calculate the cash collection from customers.

Cash collection from customers={Sales revenue(+Decrease in accounts receivable               or                 Increase in accounts receivable+Increase in deferred revenuesorDecrease in deferred revenue)}=(Sales revenue+ Decrease in accounts receivable)=$39,930+$110=$40,040

Working note 2: Calculate payments made to suppliers.

Paymentsmadetosuppliers={Cost of goods sold +Increaseininventory                   or+Decrease in accounts payableDecrease in inventory                    orIncrease in accounts payable}=(Cost of goods sold Decrease in inventoryIncrease in accounts payable)=$19,890$190$350=$19,350

Working note 3: Calculate the payments to employees

2.

To determine

Prepare the remaining sections in the cash flow statement of L Company for the year 2019.

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