Question

Analyzing Operating Cash Flows (Direct Method)
Lincoln Company owns no plant assets and reported the following income statement for the current year:

Sales		$750,000
Cost of goods sold	$470,000
Wages expense	110,000
Rent expense	42,000
Insurance expense	15,000	637,000
Net income		$113,000

	End of Year	Beg. of Year
Accounts receivable	$54,000	$49,000
Inventory	60,000	66,000
Prepaid insurance	8,000	7,000
Accounts payable	22,000	18,000
Wages payable	9,000	11,000

Calculate the net cash flow from operating activities using the direct method. Show a related cash flow for each revenue and expense.

Cash Flows from Operating Activities (Direct Method)
Cash Received from Customers		Answer
Cash Paid for Merchandise Purchased	Answer
Cash Paid to Employees	Answer
Cash Paid for Rent	Answer
Cash Paid for Insurance	Answer	Answer
Net Cash Provided by Operating Activities		Answer

Compute its operating cash flow to current liabilities (OCFCL) ratio. (Assume current liabilities consist of accounts payable and wages payable.)

Round answer to two decimal places.

Answer 1