Question

The following information applies to the questions displayed below.]

Portions of the financial statements for Parnell Company are provided below.

PARNELL COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Revenues and gains:
Sales	$	760
Gain on sale of building		10		$	770
Expenses and loss:
Cost of goods sold	$	280
Salaries		116
Insurance		36
Depreciation		119
Interest expense		46
Loss on sale of equipment		13			610
Income before tax					160
Income tax expense					80
Net income				$	80

PARNELL COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in thousands)
	Year
		2021			2020		Change
Cash	$	130		$	104		$	26
Accounts receivable		320			220			100
Inventory		325			421			(96	)
Prepaid insurance		70			84			(14	)
Accounts payable		206			121			85
Salaries payable		110			97			13
Deferred tax liability		68			56			12
Bond discount		182			204			(22	)

Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

PARNELL COMPANY				Workings:
Statement of Cash Flows (Partial)				Calculation :
For Year Ended December 31, 2021				Cash collected from customers
($ in thousands)				Beginning AR	$220
Cash flows from operating activities				+ Sales	$760
Cash Inflow:				- Ending AR	-$320
From customers	660				$660
Cash Outflows:				Purchase from suppliers
To suppliers of goods	(99)			- Beginning Inventory	-$421
To employee	(103)			+ cost of goods sold	$280
For insurance	(22)			+ Ending Inventory	$325
For bond interest	(24)				$184
For income taxes	(68)
Net cash provided by operating activities		344		Cash paid for suppliers
				Beginning AP	$121
				+ purchase from suppliers	$184
				- Ending AP	-$206
					$99
				Cash paid for salaries expenses:
				+ Beginning salaries payable	$97
				+ Salaries expenses	$116
				- Ending expenses payable	-$110
					$103
				Cash paid for insurance expenses:
				- Beginning prepaid insurance	-$84
				+ Insurance expenses	$36
				- Ending prepaid insurance	$70
					$22
				Cash paid for Income expenses:
				+ Income tax expenses	$80
				+ Beginning Deferred income tax payable	$56
				- Ending Deferred income tax payable	-$68
					$68
				Cash paid for Bond interest expenses:
				+ Bond interest expenses	$46
				- Beginning Discount on bonds	-$204
				+ Ending Discount on bonds	$182
					$24