Question

The following Income Statement and Operating Cash Flow information pertain to Receivership Inc.’s operations for the year ended December 31, 2018.

Income statement for the year ended December 31, 2018
Revenues						1,328
Cost of goods sold		587
Rent expenses		152
Wages expenses		136
Insurance expenses		53
Other SG&A (includes depreciation expenses)		198
Interest expenses		30
Gain on sale of asset		(5	)
						1,151
Income before tax						177
Tax						62
Net income						115

Cash flow provided by operating activities
(indirect method), for the year ended December 31, 2018
Net income						115
Depreciation						32
Gain on sale of asset						(5	)
						142
Increases/decreases in
Accounts receivable		26
Inventories		(35	)
Prepaid rent		13
Accounts payable		28
Wages payable		(20	)
Tax payable		5
Interest payable		(2	)
Advances from customers		(3	)
Other accrued SG&A		5
						17
Net cash provided by operating activities						159

Required:

Prepare the net cash flow from operating activities section of the cash flow statement using the direct method.

Answer 1

Solution:

Computation of cash received from customers
Particulars	Amount
Revenues	$1,328.00
Add: Decrease in Account Receivables	$26.00
Less: Decrease in Advances from customers	$3.00
Cash received from customers	$1,351.00

Computation of cash paid for Inventory
Particulars	Amount
Cost of goods sold	$587.00
Add: Increase in Inventory	$35.00
Purchases of inventory	622.00
Less: Increase in Account Payable	$28.00
Cash paid for Purchases of inventory	$594.00

Statement of Cash Flows (Partial) - Direct Method
For Year Ended December 31, 2018
Particulars	Details	Amount
Cash Flows from operating activities:
Cash received from customers		$1,351.00
Cash Paid for Inventory purchases	-$594.00
Cash paid Rent Expense ($152-$13)	-$139.00
Cash Paid for Wages ($136+$20)	-$156.00
Cash paid for insurance expenses	-$53.00
Cash paid for other SG&A ($198- $32-$5)	-$161.00
Cash paid for Interest expense ($30+$2)	-$32.00
Cash paid for income tax ($62-$5)	-$57.00
		-$1,192.00
Net Cash provided by operating activities		$159.00