Tantan income statement revealed sales of $700,000; gross profit of $300,000; se

Question

Tantan income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "direct" approach to demonstrate how this amount was calculated. The following additional information is available: Beginning-of-Period Balance End-of-Period Balance

Account receivable $70,000 $82,000

Inventory 50,000 41,000

Accounts payable 37,000 44,000

Explanation / Answer

Particulars Amunt Net Profit as per profit and loss 115000 Add: Non cash expense Depreciation 10000 Less: Increase in assets / Decrease in liabilities Accounts Receivable (82000-70000) 12000 Add: Decrease in assets / Increase in liabilities Accounts payable ( 44000-37000) 7000 Inventory (50000-41000) 9000 Cash flow from operating activities 129000

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