Question

LAG network inc. balance sheet and income statement are as follows
LAG network inc.
income statemment
for year ended dec. 31 2020
sales                                             922600
cogs                                               550200
gross profit                                     $ 372400
operating expenses:
depreciation expense    25200
other expenses                226800
total operating expenses                 252000
profit from operations                      $ 120400
invome taxes                                           12600
profit                                                       $107800
             LAG network inc.
comperative balance sheet information dec 31
assets                                    2020               2019
cash                                         81130        53200
acc. receviable                       40400       37200
merchandise inventory       283770       238600
equipment                              148400     137200
acc. depreciation                    65800       40600
total assets                       487900         425600
liabilities and equity
acc. payable                     25200          37800
income tax payable        5600          4200
common shares         357000          346500
retained earnings       100100          3710
total liabilities and equity 487900   425600
additinal information regarding LAG network inc. activities during 2020
a... equipment is purchased for $ 11200 cash
b.. 4200 common shares are issued for cash at $ 2.50 per share
c.. declared and paid $ 44800 of cash dividends   during the year
other information regarding LAG network inc.
a. all sales are credit sales
b. all credita to account receivable are receipta from customers
c. all purchase of merchandise are in credit
d. all debts to account payable result from payments for merchandise
e. other operating expenses are cash expenses
f. the only decrease in income taxes payable is for payment of taxes
required
1 prepare a statement of cash flows for 2020 using the direct method to report cash inflows and outflows from operating activities

Answer 1

Solution

LAG Network Inc

Statement of cash flows for 2020 using the direct method to report cash inflows and cash outflows from operating activities:

LAG Network Inc
Statement of Cash Flows (Direct Method)
For the Year Ended December 31, 2020
Cash flow from operating activities:
Collections from customers	919,400
payment to suppliers	-607,970
payment for operating expenses	-226,800
payment for income taxes	-11,200
net cash flow from operating activities	73,430
Cash flow from investing activities:
purchase of equipment	-11,200
Cash flow from investing activities:	-11,200
cash flow from financing activities:
issuance of common stock	10,500
dividends paid	-44,800
cash flow from financing activities:	-34,300
Increase in cash	27,930
Cash, beginning balance	53,200
Cash ending balance	81,130

Computations:

1. Collections from customers-

= sales – increase in accounts receivable

= 922,600 – (40,400 – 37,200) = 919,400

2. Payment to suppliers –

= cogs + increase in inventory + decrease in accounts payable

= 550,200 + (283,770 – 238,600) + (37,800 – 25,200)

= 550,200 + 45,170 + 12,600 = 607,970

3. Operating expenses paid = 226,800

4. Income taxes paid –

= income tax expense – increase in income taxes payable

= 12,600 – (5,600 – 4,200) = 11,200