Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 14: Q14SE (page 773)

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

Requirements

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.

2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.

Short Answer

Expert verified

Requirement 1. Collections from customers during 2018 is $123,000

Requirement 2. Payments for inventory during 2018 is $63,000.

Step by step solution

01

Step-by-Step SolutionStep 1: Computation of collections from customers during 2018 for Red Toy Company

Particulars

Amount($)

Particulars

Amount($)

Account Receivables (31st December,2017)

42,000

Account Receivables (31st December,2018)

53,000

Sales revenue

134,000

Cash collected (Balancing figure)

123,000

Total

176,000

Total

176,000

02

Computation of payments for inventory during 2018

Cash paid for inventory = Cost of goods sold – Beginning merchandise inventory + Ending merchandise inventory + Beginning Accounts Payable - Ending Accounts Payable

Cash paid for inventory =$79,000 –$88,000 + $76,000 + $38,000 - $42,000

=$63,000

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: If a company experienced a loss on disposal of long-term assets, how would this be reported in the operating activities section of the statement of cash flows when using the indirect method? Why?

Question: Computing cash flows from operating activities—indirect method

Winding Road Cellular accountants have assembled the following data for the year ended April 30, 2018:

Cash receipt from sale of land \( 27,000

Net income \) 55,000

Depreciation expense 2,000

Cash purchase of equipment 44,000

Cash payment of dividends 5,800

Decrease in current liabilities 20,000

Cash receipt from issuance of common stock 17,000

Increase in current assets other than cash 27,000

Prepare the operating activities section using the indirect method for Winding Road Cellular’s statement of cash flows for the year ended April 30, 2018.

Preparing the statement of cash flows-indirect statement This problem continues the Canyon Canoe Company situation from Chapter 13. Canyon Canoe Company's comparative balance sheet is shown below. 2019 amounts are assumed, but include several transactions from prior chapters.

Additional data fellow:

  1. The income statement for 2019 included the following items: Net income, \(417,000. Depreciation expense for the year, \)34,330. Amortization on the bonds payable, \(254.
  2. There were no disposals of property, plant and equipment during this year. All acquistions of PP&E were for cash except the land, which was acquired by issuing preferred stock.
  3. The company issued bonds payable with a face value of \)210,000, receiving cash of \(208,476.
  4. The company distributed 4,000 shares of common stock in a stock dividend when the market value was \)4.50 per share. All other dividends were paid in cash.
  5. The common stock, except for the stock dividend, was issued for cash.
  6. The cash receipt from the note payable in 2019 is considered a financing activity because it does not relate to operations. Requirements Prepare the statement of cash flows for the year ended December 31, 2019, using the indirect method.

Computing operating activities cash flow—indirect method

The records of Vintage Color Engraving reveal the following:

Net income \( 36,000

Depreciation expense \) 5,000

Sales revenue 53,000

Decrease in current liabilities 19,000

Loss on sale of land 4,000

Increase in current assets other than cash 10,000

Acquisition of land 35,000

Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.

Preparing operating activities cash flow—direct method

The accounting records of Four Seasons Parts reveal the following:

Payment of salaries and wages \( 34,000

Net income \) 21,000

Depreciation expense 10,000

Payment of income tax 16,000

Payment of interest 17,000

Collection of dividend revenue 5,000

Payment of dividends 5,000

Payment to suppliers 51,000

Collections from customers 116,000

Compute cash flows from operating activities using the direct method for the year ended December 31, 2018.
See all solutions

Recommended explanations on Business Studies Textbooks

Human Resources

Read Explanation

Influences On Business

Read Explanation

Business Case Studies

Read Explanation

Organizational Behavior

Read Explanation

Strategic Direction

Read Explanation

Operational Management

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