Prepare a statement of Cash Flows in the direct method 2017 2016 Assets: Cash 20
ID: 2528965 • Letter: P
Question
Prepare a statement of Cash Flows in the direct method
2017
2016
Assets:
Cash
200,000
70,000
Accounts receivable, net
87,000
65,000
Inventory
55,000
60,000
Property, plant & equipment
700,000
600,000
Accumulated depreciation
(100,000)
(60,000)
Total Assets
942,000
735,000
Liabilities & Equity
Accounts payable
45,000
40,000
Accrued liabilities
46,000
40,000
Common stock
460,000
460,000
Retained earnings
391,000
195,000
942,000
735,000
Sales
1,200,000
Cost of goods sold
650,000
Gross profit
550,000
Operating expenses
180,000
Pre-tax income
370,000
Income taxes
74,000
Net income
296,000
2017
2016
Assets:
Cash
200,000
70,000
Accounts receivable, net
87,000
65,000
Inventory
55,000
60,000
Property, plant & equipment
700,000
600,000
Accumulated depreciation
(100,000)
(60,000)
Total Assets
942,000
735,000
Liabilities & Equity
Accounts payable
45,000
40,000
Accrued liabilities
46,000
40,000
Common stock
460,000
460,000
Retained earnings
391,000
195,000
942,000
735,000
Sales
1,200,000
Cost of goods sold
650,000
Gross profit
550,000
Operating expenses
180,000
Pre-tax income
370,000
Income taxes
74,000
Net income
296,000
Explanation / Answer
Beginning cash balance 70000
Ending cash balance 200000
Note: dividend paid = (Beginning balance of retained earnings + net income) - Ending balance of retained earnings
= ($195000 + $296000) - $391000
= $100000
Particulars Amount($) Amount($) Cash flow from operating activities Net Income 296000 +Depreciation 40000 Adjustment for changes in working capital: +Decrease in inventory 5000 +increase in accounts payable 5000 +Increase in accrued liabilities 6000 - Increase in accounts receivable (22000) Cash flow from operating activities 330000 Cash used in investing activities (Assets purchased) (100000) Cash used in financing activities-Dividend paid (100000) Net increase in cash 130000