Jones Company is a merchandiser whose income statement for Year 2 follows: Sales
ID: 2471665 • Letter: J
Question
Jones Company is a merchandiser whose income statement for Year 2 follows:
Sales Cost of goods sold $ 2,950 1,400 Gross margin Selling and administrative expenses 1,550 300 Income before taxes Income taxes 1,250 500 Net income $ 750 The company's selling and administrative expense for Year 2 includes $74 of depreciation expense. Selected balance sheet accounts for Jones at the end of Years 1 and 2 are as follows: Year 2 Year 1 Current Assets Accounts receivable Inventory Prepaid expenses Current Liabilities Accounts payable Accrued liabilities Income taxes payable 215 260 168 186 38 29 12775 7 26 110 75Explanation / Answer
Jones Company
Direct method
Statement showing cash flows from operating activities
Sales 2950
adjustment to cash basis:
Add: beginning accounts receivable 260
Less: ending accounts receivable (215) 2995
Cost of goods sold 1400
Adjustment to cash basis:
Add: Ending inventory 168
Less: beginning inventory (186)
Add: beginning accounts payable 75
Less: ending accounts payable (127) 1330
Selling & administrative expenses 300
Adjustment to cash basis:
Add: Ending prepaid expense 38
Less: beginning prepaid expense (29)
Add: beginning accrued liabilities 26
Less: Ending accrued liabilities (7)
less: depreciation (74) 254
Income taxes 500
Adjustments to a cash basis:
Add: beginning income taxes payable 75
Less: ending income taxes payable (110) 465
Net cash provided by operating activities 946.
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