Pizza International, Inc. operates 940 family restaurants around the world. The
ID: 2534861 • Letter: P
Question
Pizza International, Inc. operates 940 family restaurants around the world. The company's annual report contained the following information (in millions) Operating Activities S (9.476) 33,311 176 649 676 2,288 731 1,873 12.703 29.085 Net Loss Increase in Receivables Decrease in Inventory Increase in Prepaid Expenses Decrease in Accounts Payable Decrease in Accrued Liabilities Increase in Income Taxes Payable Payments on Notes Payable Cash Paid for Equipment The following summarized income statement for Pizza Intemational, Inc. (in millions): Revenues Cost of Sales $137,100 45,800 Gross Profit Salary and Wages Expense Depreciation Other Expenses 91,300 56,865 33,311 7.787 Net Loss before Income Tax Expense Income Tax Expense 6.663) 2,813 Net Loss S (9,476) Required: 1. Based on this information, compute cash flow from operating activities using the direct method. Assume that Prepaid Expenses and Accrued Liabilities relate to other expenses. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions. (i.e., 10,000,000 should be entered as 10).) PIZZA INTERNATIONAL, Cash Flow from Operating Activities-Direct MethodExplanation / Answer
Ans. (1) Pizza International, INC. Cash Flow from operating activities - Direct Method Particulars Amt. ($) Amt. ($) Cash flow from operating activities: Revenues 137,100 Less: Expenses Cost of Goods Sold (45,800) Salaries and Wages Expenses (56,865) Other Expenses (7,787) (110,452) Operating profit before working capital changes 26,648 Add: Decrease in inventory 649 Add: Increase in Income taxes Payable 1,873 Less: Increase in Receivables (176) Less: Increase in prepaid expenses (676) Less: Decrease in accounts payable (2,288) Less: Decrease in accrued lliabilities (731) (1,349) Operating Profit before income tax expense 25,299 Less: Income Tax expense (2,813) Net cash from operating activities 22,486 Ans. (2) The primary reason for the net loss was the Depreciation expense and it does not affect cash flow from Operating activities.