New Vision Company completed its income statement and balance sheet for 2010 and
ID: 2384682 • Letter: N
Question
New Vision Company completed its income statement and balance sheet for 2010 and provided the following information:
Service Revenue $ 66,000
Expenses:
Salaries $ 42,000
Depreciation 7,300
Utilities 7,000
Other 1,700 58,000
Net Income $ 8,000
Decrease in Accounts Receivable $ 12,000
Bought a small service machine 5,000
Increase in Salaries Payable 9,000
Decrease in Other Accrued Liabilities 4,000
Requirement 1:
Present the operating activities section of the statement of cash flows for New Vision Company using the direct method. Assume that Other Accrued Liabilities relate to Other Expenses on the income statement. (Amounts to be deducted and negative net cash amount should be indicated with minus sign. Omit the "$" sign in your response.)
Cash flows from operating activities–direct method
Cash collected from customers $
Cash payments to employees
Cash paid for other expenses
Net cash provided by operating activities $
Requirement 2:
Of the potential causes of differences between cash flow from operations and net income, which are the most important to financial analysts? (Select all that apply.)
1-Changes in revenue and expense recognition.
2- Different methods of preparing cash flows and income statement.
3- Changes in management of operating activities.
Explanation / Answer
Net Income $8,000 Adjustments: Depreciation $7,300 Loss on sale of equipment $1,700 Decrease in Accounts receivable $12,000 Increase in Salary payable $9,000 Decrease in accrued liabilities ($4,000) $26,000 $34,000 ======