Question

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Mike Roe Computers.

MIKE ROE COMPUTERS Income Statement For the Year Ended December 31, 2018
Sales				$	148.20
Cost of goods sold					(89.10	)
Gross margin					59.10
Salaries expense	$	18.20
Insurance expense		11.20
Depreciation expense		4.10
Interest expense		5.10			(38.60	)
Gains and losses:
Gain on sale of equipment					10.20
Loss on sale of land					(1.20	)
Income before tax					29.50
Income tax expense					(14.75	)
Net income				$	14.75

Reconciliation of Net Income to Net Cash Flows from Operating Activities
Net income	$	14.75
Adjustments for noncash effects:
Decrease in accounts receivable		4.10
Gain on sale of equipment		(10.20	)
Increase in inventory		(5.10	)
Increase in accounts payable		8.10
Increase in salaries payable		2.10
Depreciation expense		4.10
Decrease in bond discount		2.55
Decrease in prepaid insurance		1.10
Loss on sale of land		1.20
Increase in income tax payable		5.10
Net cash flows from operating activities	$	27.80

Required:
1. Provide the summary journal entry which shows the cash flow for each of the following for Mike Roe Computers during the reporting period: received from customers, paid to suppliers, paid to employees, paid for interest, paid for insurance, paid for income taxes.
2. get ready  the cash flows from operating activities section of the statement of cash flows (direct method).

Answer 1

Notes:

Cash Receipts from Customers:
Net Sales	148.8
Decrease in accounts receivable	4.4
	153.2
Cash Payment to suppliers
Purchases	89.4
Increase in inventory	5.4
Less: Increase in accounts payable	-8.4
	86.4
Cash Payments to Employees
Salaries	18.8
Less: Increase in salary payable	-2.4
	16.4
Cash Payments for insurance
Insurance expense	10.8
Less: decrease in prepaid insurance	-1.4
	9.4
Interest Payments	5.4
Add: amortization of bond discount	-2.70
	2.70
Income Tax Payments	14.50
Increase in income tax payable	-5.40
	9.10