Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 14: 12SE (page 732)

Preparing operating activities using the direct method Amy’s Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business’s statement of cash flows for the year ended June 30, 2018, using the direct method.

Short Answer

Expert verified

Net cash provided by operating activities is $7,000.

Step by step solution

01

Cash flow from operating activities

Cash flows from operating activities

Receipts:

Collection from customers

$188,000

Payments:

To suppliers

($115,000)

To employees

($66,000)

Net cash provided by operating activities

$7,000

02

Classification of investing and financing activity

Transaction

Activity

Cash payment for purchase of equipment

Investing

Payment of notes payable

Financing

Payment of dividends

Financing

Cash receipt from issuance of stock

Financing

Cash receipt from sale of land

Investing

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: Computing cash flows from operating activities—indirect method

DVR Equipment, Inc. reported the following data for 2018:

Income Statement:

Net Income $ 43,000

Depreciation Expense 6,000

Balance Sheet:

Increase in Accounts Receivable 6,000

Decrease in Accounts Payable 2,000

Compute DVR’s net cash provided by operating activities—indirect method.

Question: What is free cash flow, and how is it calculated?

Use the Rouse Exercise Equipment data in Exercises E14-23 and E14-24. Rouse plansto purchase a truck for \(23,000 and a forklift for \)125,000 next year. In addition, itplans to pay cash dividends of $3,500. Assuming Rouse plans similar activity for 2019,what would be the amount of free cash flow?

Computing cash flows for investing and financing activities Consider the following facts for Java Jolt:

  1. Beginning and ending Retained Earnings are \(45,000 and \)70,000, respectively. Net income for the period is \(60,000.
  2. Beginning and ending Plant Assets are \)124,500 and \(134,500, respectively.
  3. Beginning and ending Accumulated Depreciation—Plant Assets are \)21,500 and \(26,500, respectively.
  4. Depreciation Expense for the period is \)17,000, and acquisitions of new plant assets total \(29,000. Plant assets were sold at a \)5,000 gain. Requirements 1. How much are cash dividends? 2. What was the amount of the cash receipt from the sale of plant assets?

American Rare Coins (ARC) was formed on January 1, 2018. Additional data for the year follow:

a. On January 1, 2018, ARC issued no par common stock for \(450,000.

b. Early in January, ARC made the following cash payments:

  1. For store fixtures, \)53,000
  2. For merchandise inventory, \(340,000
  3. For rent expense on a store building, \)20,000

c. Later in the year, ARC purchased merchandise inventory on account for \(239,000. Before year-end, ARC paid \)139,000 of these accounts payable.

d. During 2018, ARC sold 2,400 units of merchandise inventory for \(275 each. Before year-end, the company collected 85% of this amount. Cost of goods sold for the year was \)250,000, and ending merchandise inventory totaled \(329,000.

e. The store employs three people. The combined annual payroll is \)96,000, of which ARC still owes \(3,000 at year-end.

f. At the end of the year, ARC paid income tax of \)17,000. There are no income taxes payable.

g. Late in 2018, ARC paid cash dividends of $44,000.

h. For store fixtures, ARC uses the straight-line depreciation method, over five years, with zero residual value.

Requirements

  1. What is the purpose of the statement of cash flows?
  2. Prepare ARC’s income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together.
  3. Prepare ARC’s balance sheet at December 31, 2018.

Prepare ARC’s statement of cash flows using the indirect method for the year ended December 31, 2018.
See all solutions

Recommended explanations on Business Studies Textbooks

Managers

Read Explanation

Change Management

Read Explanation

Strategic Analysis

Read Explanation

Financial Performance

Read Explanation

Business Development

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free