Salisbury Company had the following transactions during May 2011 ($ in millions)

Question

Salisbury Company had the following transactions during May 2011 ($ in millions) The company prepared the following accrual-basis earnings statement and analysis of its transactions for the month of May Mustard carried in inventory at a cost of $11 was sold for cash of $10 and on open account of $16, for a grand total of $26. Acquired inventory on account, $10. Collected receivables, $11. On May 2, used $72 cash to prepay some rent and insurance for 6 months. Salisbury classifies prepaid expenses as other assets. Payments on accounts payable (for inventories), $8. Paid selling and administrative expenses in cash, $8. Prepaid expenses of $12 for rent and insurance expired inMay. Depreciation expenses of $5 was recognized for May.

Explanation / Answer

Salisbury Company Cash Flow Statement For the month ended May 31, 2011 Operating Cash receipts Sale of Inventory $10 Collection of accounts receivables $11 Total Operating Cash receipts $21 Deduct operating cash disbursements Paid Rent & Insurance Exp. $72 Payment of Accounts Payables $8 Paid Selling & Adminstrative Exp. $8 Total operating cash disbursements $88 Net Cash inflow (outflow) from operations ($67)

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