Question

  The following Income Statement and account balance changes apply to this question:

Income Statement for the year:

Sales                                   $1,400,000

Cost of Goods Sold                 810,000

Gross Profit                            $590,000

Operating Expenses               360,000

Net Income before Taxes $230,000

Taxes                                             34,000

Net Income                              $196,000

Account Balance Changes during the year:

Accounts Payable increase                                  $6,000

Prepaid expenses decrease                                          $4,500

Taxes Payable increase                                                  $8,200

Accounts Receivable decrease                                    $24,000

Additions to Accumulated Depreciation                     $76,000

Inventory increase                                               $12,000

Accrued liabilities (e.g., Wages Payable) decrease        $5,000

What were cash receipts from sales for the year, using the direct method?

A)$1,412,000	B)$1,388,000
C)$1,424,000	D)1,376,000

What was the amount of cash payments made during the year for inventory purchases, using the direct method?

A)$822,00	B)$804,000
C)$828,000	D)$816,000

What was the amount of cash payments for taxes this year, using the direct method?

A)$25,800	B)$51,200
C)$20,800	D)34,800

What was the amount of cash payments for operating expenses this year, using the direct method?

A)$283,500	B)$284,500
C)274,500	D)293,500

Answer 1

Cash receipt from sales = sales + decrease in account receivables
=$1400000+24000
=$1424000
C)$1,424,000
Purchases = cost of goods sold + increase in inventory
=$810000+12000
=$822000
Cash Payment for inventory = purchases - increase in payable
=$822000-6000
=$816000
D)$816,000
Cash Payment for taxes = Tax expeses - increase in tax payable
=$34000-8200
=$25800
A)$25,800
Cash payment for operating expenses = operating expenses + decrease in accrued liabilities - decrease in prepaid expenses- accumulated depreciation
=$360000+5000-4500
=$284500
B)$284,500