Problem#8 (6%) Direct Method Cash Flows Thie folloving selected items are report

Question

Problem#8 (6%) Direct Method Cash Flows Thie folloving selected items are reported on Kiermaier Corp's Malti-Step Income Statement (listed alphabetically): Cost of Goods Sold-$125,000 Income Tax Expense $21,900 Loss on Equipment Retirement- $12,000 Net Income $51,100 Operating Expenses-$60,000 Sales $290,000 Sales returns- $20,000 In addition, the following information related on changes in accounts is presented: ash ccounts receivable Decrease of $22,000 Decrease of S12,000 nventories Increase of $14,500 Increase of S6,000 Increase of S5,000 Decrease of $4,500 alaries payable (operating expenses) payable (on inventory purchases) Decrease of S10,000 ncome taxes payable id Expenses Decrease of $2,000 Unearned Revenue Dividends Payable Increase of S3,000 Kiermaier also indicates that depreciation expense for the year was $21,000. Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows using the DIRECT METHOD.

Explanation / Answer

Working Net Income 51100 add: loss on equipment sale 12000 63100 Adjustment of chcanges for cash: Decrease in Account Receivable 12000 Increase in Inventories -14500 Increase in Salary Payable 6000 Decrease in Account payable -10000 Increase in Income tax payable 5000 Decrease in Prepaid Exp 2000 Decrease in unearned revenue -4500 Increase in Dividend Payable 0 (not for operating activities) Depreciation Exp 21000 17000 Net Cash provided by operating activities 80100 Direct Method: Cash received from customers (290000-20000+12000) Sales-Return+Decrease in R 282000 Cash paid to suppliers (125000+14500+10000) COGS+Inventory+Payable 149500 Operating expenses paid (60000-6000+4500-2000-21000) Exp-Salary+Revenu unearned-prepaid exp-Dep 35500 Taxes paid (21900-5000 Income tax-payable tax 16900 201900 Net cash by opearting activities 80100

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