Question

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Steppenwolf Co. uses the direct method to prepare its statement of cash flows. Steppenwolf's financial statements are as follows:

Comparative Balance Sheet
	12/31/Year 2		12/31/Year 1
Cash	$10,000		$20,500
Accounts receivable	17,000		13,000
Inventory	25,000		20,000
Supplies	900		500
Prepaid insurance	800		2,000
Equipment, net of accumulated depreciation	36,000		40,000
Total assets	$89,700		$96,000
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Accounts payable	25,000		31,000
Salaries payable	13,000		16,000
Common stock, $10 par value	25,000		25,000
Additional paid-in capital	14,000		14,000
Retained earnings	12,700		10,000
Total liabilities and stockholders' equity	$89,700		$96,000
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Income Statement
			For Year Ended    12/31/Year 2
Sales			$50,000
Cost of goods sold			31,000
Gross profit			19,000
Salary expense			10,000
Supplies expense			1,000
Insurance expense			1,300
Depreciation expense			4,000
Net income			$  2,700
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Using the direct method, prepare the operating activities section of the statement of cash flows for Steppenwolf for the year ended December 31, Year 2. Enter the appropriate amounts in the designated cells below. Indicate negative numbers using a leading minus (-) sign.

Cash flows from operating activities	Amount
1. Cash received from customers
2. Cash paid to purchase inventory
3. Cash wages paid to employees
4. Cash paid for supplies
5. Cash paid for insurance
6. Net cash flow from operating activities

Answer 1

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