Problem 16-5AB Statement of cash flows (direct method) L.O. P1, P3, P5 Galley Co
ID: 2352081 • Letter: P
Question
Problem 16-5AB Statement of cash flows (direct method) L.O. P1, P3, P5Galley Corp., a merchandiser, recently completed its 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company
Explanation / Answer
Statement of Cash flows (direct method)
Cash flows from operating activities
cash received from customers
2,297,045
(sales - increase in AR)
cash paid for merchandise
-1,172,122
(cogs + increase in inventory + decrease in AP)
cash paid for other operating expenses
-445,229
cash paid for income taxes
-141,789
(income tax expense - increase in taxes payable)
net cash operating activities
537,905
Cash flows from investing activities
Purchase of equipment
-37,938
net cash investing activities
-37,938
Cash flows from financing activities
payment of dividend
-534,588
sale of common stock
96,000
net cash financing activities
-438,588
net increase in cash
61,379
Cash balance, beginning
125,874
cash balance, ending
187,253
Statement of Cash flows (direct method)
Cash flows from operating activities
cash received from customers
2,297,045
(sales - increase in AR)
cash paid for merchandise
-1,172,122
(cogs + increase in inventory + decrease in AP)
cash paid for other operating expenses
-445,229
cash paid for income taxes
-141,789
(income tax expense - increase in taxes payable)
net cash operating activities
537,905
Cash flows from investing activities
Purchase of equipment
-37,938
net cash investing activities
-37,938
Cash flows from financing activities
payment of dividend
-534,588
sale of common stock
96,000
net cash financing activities
-438,588
net increase in cash
61,379
Cash balance, beginning
125,874
cash balance, ending
187,253