Question

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below for Macrosoft Corporation.

MACROSOFT CORPORATION Income Statement For the Year Ended December 31, 2021 ($ in millions)
Revenues and gains:
Sales	$	320.00
Gain on sale of cash equivalents		2.50
Gain on sale of investments		24.50		$	347.00
Expenses and loss:
Cost of goods sold	$	125.00
Salaries		40.50
Interest expense		12.50
Insurance		20.50
Depreciation		10.50
Patent amortization		4.50
Loss on sale of land		6.50			220.00
Income before tax					127.00
Income tax expense					63.50
Net income				$	63.50

   

Reconciliation of Net Income to Net Cash Flows from Operating Activities ($ in millions)
Net income	$	63.50
Adjustments for noncash effects:
Depreciation expense		10.50
Patent amortization expense		4.50
Loss on sale of land		6.50
Gain on sale of investment		(24.50	)
Decrease in accounts receivable		6.50
Increase in inventory		(12.50	)
Increase in accounts payable		18.50
Decrease in bond discount		1.50
Increase in salaries payable		6.50
Decrease in prepaid insurance		4.50
Increase in income tax payable		10.50
Net cash flows from operating activities	$	96.00

Required:

Prepare the cash flows from operating activities section of the statement of cash flows (direct method). (Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Amounts

Answer 1

Cash receipts from customers = Sales + Decrease in accounts receivable
Cash receipt from customers = $320 + $6.50
Cash receipt from customers = $326.50

Cash paid for material purchases = Cost of Goods Sold + Increase in Inventory – Increase in Accounts Payable
Cash paid for material purchases = $125 + $12.50 - $18.50
Cash paid for material purchases = $119

Cash paid towards the salaries = Salaries as per income statement – Increase in Salaries Payable
Cash paid towards the salaries = $40.50 - $6.50
Cash paid towards the salaries = $34

Cash paid towards Insurance = Insurance expense as per Income Statement – Decrease in Prepaid Insurance
Cash Paid towards Insurance = $20.50 -$4.50
Cash Paid towards Insurance = $16

Cash Paid towards income tax = Income Tax as per Income Statement – Increase in Income tax Payable
Cash Paid towards Income Tax = $63.50 - $10.50
Cash Paid towards Income Tax = $53

Interest Paid in cash = Interest Expense as per Income Statement – Decrease in Bonds Discount
Interest Paid in Cash = $12.50 - $1.50
Interest Paid in Cash = $11