Question

Benson Brands, Inc. Benson, presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Benson’s 2017 and 2016 year-end balance sheets:

Account Title	2017			2016
Accounts receivable	$	20,000		$	30,000
Merchandise inventory		56,000			49,600
Prepaid insurance		16,500			24,700
Accounts payable		26,800			18,500
Salaries payable		4,700			4,000
Unearned service revenue		1,000			2,900

The 2017 income statement is shown below:

Income Statement
Sales	$	610,000
Cost of goods sold		(380,000	)
Gross margin		230,000
Service revenue		4,900
Insurance expense		(39,000	)
Salaries expense		(157,000	)
Depreciation expense		(4,100	)
Operating income		34,800
Gain on sale of equipment		3,600
Net income	$	38,400

Required

1. Prepare the operating activities section of the statement of cash flows using the direct method.

2. Prepare the operating activities section of the statement of cash flows using the indirect method.

Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.)

	BENSON BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, 2017 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Net cash flow from operating activities $0

Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

	BENSON BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, 2017 Cash flows from operating activities: Add: Deduct: Add: noncash expenses Net cash flow from operating activities $0

Answer 1

1.

BENSON BRANDS, INC.
Statement of Cash Flows (Operating Activities)
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash collections from customer sales	$   620,000
Cash collections from customers for services	$        3,000
Cash payments for:
Purchase of merchandise inventory	$ (378,100)	380000+18500-26800+56000-49600
Insurance expense	$   (30,800)	39000+16500-24700
Salaries expense	$ (156,300)	157000+4000-4700
Net cash provided by operating activities	$      57,800

BENSON BRANDS, INC.
Statement of Cash Flows (Operating Activities)
For the Year Ended December 31, 2017
Cash flows from operating activities
Net Income	$ 38,400
Add:
Decrease in accounts receivable	$ 10,000
Decrease in prepaid insurance	$    8,200
Increase in accounts payable	$    8,300
Increase in salaries payable	$        700
Deduct:
Increase in merchandise inventory	$ (6,400)
Decrease in unearned service revenue	$ (1,900)
Gain on sale of equipment	$ (3,600)
Add: Non cash expenses
Depreciation expense	$    4,100
Net cash provided by operating activities	$ 57,800

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