Question

Presented below is the 2021 income statement and comparative balance sheet information for Tiger Enterprises.

TIGER ENTERPRISES
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Sales revenue								$	7,420
Operating expenses:
Cost of goods sold		$	3,430
Depreciation expense			310
Insurance expense			170
General and administrative expense			1,870
Total operating expenses									5,780
Income before income taxes									1,640
Income tax expense									(670	)
Net income								$	970
Balance Sheet Information ($ in thousands)	Dec. 31,2021						Dec. 31, 2020
Assets:
Cash		$	370					$	270
Accounts receivable			820						900
Inventory			710						670
Prepaid insurance			85						55
Equipment			2,450						2,150
Less: Accumulated depreciation			(980	)					(670	)
Total assets		$	3,455					$	3,375
Liabilities and Shareholders' Equity:
Accounts payable		$	370					$	430
Accrued liabilities (for general & administrative expense)			370						470
Income taxes payable			270						220
Notes payable (due 12/31/2022)			870						670
Common stock			970						870
Retained earnings			605						715
Total liabilities and shareholders' equity		$	3,455					$	3,375

Required:
Prepare the cash flows from operating activities section of Tiger's 2021 statement of cash flows using the direct method. Assume that all purchases and sales of inventory are on account, and that there are no anticipated bad debts for accounts receivable. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)

Answer 1

Based on the information available in the question, we can prepare the cash flows from operating activities under the direct method as follows:-

Particulars	Amount
Cash received from customers	7,500
Cash paid to suppliers	(3,530)
Cash paid for general and admin expenses	(1,970)
Cash paid for insurance	(200)
Cash paid for income taxes	(620)
Net Cash flow from operating activities	1,260

Note 1:-	Cash Received from customers:-
	Opening accounts receivable	900
	Add:- Sales revenue	7,420
	Less:- Closing accounts receivable	(820)
	Cash received from customers	7,500
Note 2:-	Cash paid to suppliers
	Opening accounts payable	430
	Add:- Cost of goods sold	3,430
	Less:- Closing accounts payable	(370)
	Add:- Closing inventory	710
	Less:- Opening Inventory	(670)
	Cash paid to suppliers	3,530
Note 3:-	Cash paid for general and administrative expenses
	Opening Accrued Liabilities	470
	Add:-General and administrative expenses	1,870
	Less:- Closing accrued liabilities	(370)
	Cash paid for general and administrative expenses	1,970
Note 4:-	Cash paid for Insurance
	Closing balance of prepaid insurance	85
	Add:- Insurance expense	170
	Less:- Opening balance of prepaid insurance	(55)
	Cash paid for insurance	200
Note 5:-	Cash paid for Income taxes
	Opening balance of Income taxes payable	220
	Add:- Income tax expense	670
	Less:- Closing balance of Income tax payable	(270)
	Cash paid for Income taxes	620