Question

Carr Corporation's comparative balance sheet and income statement for last year appear below:

Comparative Balance Sheet
	Ending Balance			Beginning Balance
Cash and cash equivalents	$	3,090		$	24,610
Accounts receivable		88,000			76,680
Inventory		39,800			47,940
Prepaid expenses		9,810			15,750
Long-term investments		254,400			210,000
Property, plant, and equipment		540,750			504,000
Less accumulated depreciation		329,600			312,700
Total assets	$	606,250		$	566,280
Accounts payable	$	9,540		$	25,500
Accrued liabilities		24,480			17,850
Income taxes payable		53,400			48,300
Bonds payable		176,000			216,000
Common stock		150,000			140,000
Retained earnings		192,830			118,630
Total liabilities and stockholders' equity	$	606,250		$	566,280

Income Statement
Sales	$	884,000
Cost of goods sold		472,500
Gross margin		411,500
Selling and administrative expense		294,300
Net operating income		117,200
Income taxes		42,900
Net income	$	74,300

The company declared and paid $100 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year.

Required:

Prepare the operating activities section of the company's statement of cash flows for the year using the direct method.

Answer 1

ARDUOUS COMPANY					Workings:
Statement of Cash Flows					Calculation :
For Year Ended December 31, 2021					Cash collected from customers
($ in millions)					Beginning AR	76,680
Cash flows from operating activities					+ Sales	884,000
Cash Inflow:					- Ending AR	(88,000)
From customers	872,680					872,680
Cash Outflows:
To suppliers of goods	(480,320)				Purchase from suppliers
To Selling and administrative expense	(264,830)				- Beginning Inventory	(47,940)
For income taxes	(37,800)				+ cost of goods sold	472,500
					+ Ending Inventory	39,800
Net cash provided by operating activities		89,730				464,360
					Cash paid for suppliers
					Beginning AP	25,500
					+ purchase from suppliers	464,360
					- Ending AP	(9,540)
						480,320
					Cash paid for Income expenses:
					+ Beginning Income tax payable	48,300
					+ Income tax expenses	42,900
					- Ending Income tax payable	(53,400)
						37,800
					Cash paid for operating expenses:
					+ Beginning accrued liabilities	$17,850
					+ Selling and administrative expenses ($294,300 - 16,900)	$277,400
					- Ending accrued liabilities	-$24,480
					- Beginning prepaid expense	-$15,750
					+ Ending prepaid expense	$9,810
						$264,830