Prepare the cash flows from operating activities section of Tiger’s 2021 statement of cash flows using the direct method.

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.

E 4–20

TIGER ENTERPRISES Income Statement For the Year Ended December 31, 2021 (S in thousands) Sales revenue $7,000 Operating expenses: Cost of goods sold Depreciation expense Insurance expense $3,360 240 100 General and administrative expense Total operating expenses 1,800 5,500 Income before income taxes 1,500 Income tax expense (600) Net income

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Expert Solution

The T-account analysis of the transactions related to operating cash flows is shown below. To derive the cash flows, the beginning and ending balances in the related assets and liabilities are inserted, together with the revenue and expense amounts from the income statements. In each balance sheet account, the remaining (plug) figure is the other half of the cash increases or decreases.

Based on the information in the T-accounts above, the operating activities section of the SCF for Tiger Enterprises would be as shown next.

TIGER ENTERPRISES

Statement of Cash Flows

For the Year Ended December 31, 2021

($ in thousands)

Cash flows from operating activities:

Cash received from customers (a) $ 7,080

Cash paid for insurance (b) (130)

Cash paid for merchandise (c) (3,460)

Cash paid for general and administrative exp. (d) (1,900)

Cash paid for income taxes (e) (550)

Net cash flows from operating activities $ 1,040

Raffay answered 1 year ago

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