2. The following data pertains to the Pretty Roses Company for the year of 2014:

Question

2. The following data pertains to the Pretty Roses Company for the year of 2014:

a) Salaries and wages: accrued, $175,000; paid in cash $200,000.

b) Depreciation, $50,000.

c) Interest expense, all paid in cash, $12,500.

d) Other expenses, all paid in cash, $112,000.

e) Income taxes accrued, $35,000; income taxes paid in cash, $33,000.

f) Bought plant and facilities for $365,000 cash.

g) Sales of $1,500,000, all on credit. Cash collections from customers, $1,250,000.

h) The cost of items sold was $750,000. Purchases of inventory totaled $825,000;

i) inventory and accounts payable were affected accordingly.

j) Cash payments on trade accounts payable were $700,000.

k) Issued long-term debt for $110,000 cash.

l) Paid cash dividends of $45,000.

Prepare a statement of cash flows using the direct method for reporting cash flows from operating activities.

*Can you please write the answer text not picture

Explanation / Answer

Solution

Statement of cash Flows using Direct Method

Particulars Amount Cash Collection from customers $1250000 Cash Paid to creditors ($700000) Cash paid to employees ($200000) Cash paid for other Expenses (Assume to be operating in nature) ($112000) Income Taxes Paid in cash ($33000) Cash Flow from operating activities $205000

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