Cash Flows from Operating Activities—Direct Method The income statement of Booke

Question

Cash Flows from Operating Activities—Direct Method

The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Changes in the balances of selected accounts from the beginning to the end of the current year are as follows:

a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Sales $550,000 Cost of merchandise sold 312,300 Gross profit $237,700 Operating expenses: Depreciation expense $42,210 Other operating expenses 111,580 Total operating expenses 153,790 Income before income tax $83,910 Income tax expense 23,270 Net income $60,640

Explanation / Answer

Cash Receipt From Customer Sales 550000 Add: Decrease in Account Receivable 12190 Cash Receipt from Customer 562190 Cost of Goods Sold 312300 Add; Decrease in Account Payable 8670 Add: Increase in Inventory 4240 Cash Paid to Supplies 325210 Cash payment for Operating Expense Other Operating Expense 111580 Less: Decrease in prepaid Expense -4060 Less: Increase in op Expense -1210 106310 Cash payment for Income Tax Income Tax Expense 23270 Add: Decrease in Income Tax Payable 2910 Cash Payment for Tax 26180

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