Situation A: Chenowith Co. reports revenues of $198,840 and operating expenses o
ID: 2376712 • Letter: S
Question
Situation A:
Chenowith Co. reports revenues of $198,840 and operating expenses of $111,870 in its first year of operations, 2012. Accounts receivable and accounts payable at year-end were $81,980 and $40,900, 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. (If an amount reduces the account balance then enter with negative sign.)
$ Chenowith Co. reports revenues of $198,840 and operating expenses of $111,870 in its first year of operations, 2012. Accounts receivable and accounts payable at year-end were $81,980 and $40,900, 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. (If an amount reduces the account balance then enter with negative sign.) The income statement for Edgebrook Company shows cost of goods sold $305,500 and operating expenses (exclusive of depreciation) $230,300. The comparative balance sheet for the year shows that inventory increased $21,070, prepaid expenses decreased $7,650, accounts payable (related to merchandise) decreased $16,070, and accrued expenses payable increased $14,630. Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.
Explanation / Answer
1.
198,840 - 81,980= 116,860
111,870 - 40,900= 70,970
116,860 - 70, 970 = 45,890 (Net cash in)
2. COGS 305,500
ADD Increase in Inventory 21,070
COST OF PURCHASE 326,570
ADD DECREASE IN A/P 16,070