Presented below are two independent situations. Situation A: Annie Lennox Co. re

Question

Presented below are two independent situations.

Situation A:
Annie Lennox Co. reports revenues of $194,440 and operating expenses of $109,760 in its first year of operations, 2014. Accounts receivable and accounts payable at year-end were $82,900 and $38,230, respectively. Assume that the accounts payable related to operating expenses. Ignore income taxes.

Using the direct method, compute net cash provided (used) by operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Situation B:
The income statement for Blues Traveler Company shows cost of goods sold $312,160 and operating expenses (exclusive of depreciation) $228,310. The comparative balance sheet for the year shows that inventory increased $21,160, prepaid expenses decreased $7,810, accounts payable (related to merchandise) decreased $19,300, and accrued expenses payable increased $11,950.

Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.

$

Explanation / Answer

Situation A Cash from operating activities $ $ Revenues 194440 Less : Accounts Receivable at the year end -82900 Cash received from customers 111540 Operating expenses 109760 Less: Accounts Payable at the year end -38230 Operating expenses Paid -71530 Net Cash provided by operating activities 40010 Situation B a) Cash Payments to Suppliers Cost of Goods Sold 312160 Add :Increase in inventory 21160 Add: Decrease in Accounts payable 19300 Cash Payments to Suppliers 352620 b) Cash Payments for operating expenses Operating Expenses 228310 Less: Decrease in prepaid expenses -7810 Less: Increase in accrued expenses payable -11950 Cash Payments for operating expenses 208550

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