In: Accounting
Blossom Co. reports revenues of $201,000 and operating expenses
of $109,000 in its first year of operations, 2017. Accounts
receivable and accounts payable at year-end were $71,500 and
$28,800, respectively. Assume that the accounts payable related to
operating expenses. (Ignore income taxes.)
Using the direct method, compute net cash provided (used) by
operating activities. (Show amounts that decrease cash
flow with either a - sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
Net cash
usedprovided by operating activities |
$ |
Situation B:
The income statement for Blue Traveler Company shows cost of goods
sold $308,100 and operating expenses (exclusive of depreciation)
$231,000. The comparative balance sheet for the year shows that
inventory increased $26,100, prepaid expenses decreased $8,100,
accounts payable (related to merchandise) decreased $17,000, and
accrued expenses payable increased $11,000.
Compute (a) cash payments to suppliers and (b) cash payments for
operating expenses.
(a) | Cash payments to suppliers | $ | ||
(b) | Cash payments for operating expenses | $ |
Answer to Question 1:
Cash received from customers = Revenues - Ending accounts
receivable
Cash received from customers = $201,000 - $71,500
Cash received from customers = $129,500
Cash payments to suppliers = Operating expenses - Ending
accounts payable
Cash payments to suppliers = $109,000 - $28,800
Cash payments to suppliers = $80,200
Net cash provided by operating activities = Cash received from
customers - Cash payments to suppliers
Net cash provided by operating activities = $129,500 -
$80,200
Net cash provided by operating activities = $49,300
Answer to Question 2:
Cash payments to suppliers = Cost of goods sold + Increase in
inventory + Decrease in accounts payable
Cash payments to suppliers = $308,100 + $26,100 + $17,000
Cash payments to suppliers = $351,200
Cash payments for operating expenses = Operating expenses -
Decrease in prepaid expenses - Increase in accrued expenses
payable
Cash payments for operating expenses = $231,000 - $8,100 -
$11,000
Cash payments for operating expenses = $211,900