The income statement and a schedule reconciling cash flows from operating activi
ID: 2531295 • Letter: T
Question
The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Mike Roe Computers.
Required:
1. Provide the summary journal entry which shows the cash flow for each of the following for Mike Roe Computers during the reporting period: received from customers, paid to suppliers, paid to employees, paid for interest, paid for insurance, paid for income taxes.
2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).
Income Statement
For the Year Ended December 31, 2018 Sales $ 150.20 Cost of goods sold (90.10 ) Gross margin 60.10 Salaries expense $ 20.20 Insurance expense 12.20 Depreciation expense 5.10 Interest expense 6.10 (43.60 ) Gains and losses: Gain on sale of equipment 12.20 Loss on sale of land (3.20 ) Income before tax 25.50 Income tax expense (12.75 ) Net income $ 12.75
Explanation / Answer
Journal entries: Accounts title and explanations Debit $ Credit $ Cash Account Dr. 155.30 Accounts receivable 155.30 Accounts payable Dr. 87.10 cash account 87.10 Salaries account Dr. 20.20 Cash account 17.10 Ssalaries payable 3.10 Insurance expense Account Dr. 12.20 Cash account 10.10 Prepaid insurance 2.10 Interest expense Dr. 6.10 Cash account 3.05 Discount on bonds payable 3.05 Income tax expense Dr. 12.75 Cash account 6.65 Income tax payable 6.1 Cash flows from Operating Activities: Cash received from collection of customerr (150.20+5.10) 155.3 Cash paid to suppliers for purchases (90.10+6.10-9.10) -87.1 Cash paid for salaries (20.20-3.10) -17.1 Cash paid for Insurance expense (12.20-2.10) -10.1 Interest paid (6.10-3.05) -3.05 Taxes paid (12.75-6.10) -6.65 Net cash provided from Operating activities 31.3
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