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 (Please answer the following):

-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 Accounts receivables	$26.00
Less: decrease in advance from customer	$3.00
Cash received from customers	$1,351.00

Computation of cash paid for inventory to supplier
Particulars	Amount
Cost of Goods Sold	$587.00
Add: Increase in inventory	$35.00
Purchases made during the year	$622.00
Less: Increase in Accounts payable	$28.00
Cash paid for inventory to supplier	$594.00

Computation of cash paid for Rent
Particulars	Amount
Rent Expense	$152.00
Less: Decrease in prepaid rent	$13.00
Cash paid for Rent	$139.00

Computation of cash paid for Income Tax
Particulars	Amount
Income tax expense	$62.00
Less: Increase in income tax payable	$5.00
Cash paid for income tax	$57.00

Computation of cash paid for Wages
Particulars	Amount
Wage Expense	$136.00
Add: Decrease in Wage Payable	$20.00
Cash paid for Wages	$156.00

Computation of cash paid for Interest
Particulars	Amount
Interest Expense	$30.00
Add: Decrease in Interest Payable	$2.00
Cash paid for Interest	$32.00

Computation of cash paid for SG&A Expenses
Particulars	Amount
SG&A Expense	$198.00
Less: Increase in Accrued SG&A Expense	$5.00
Less: Depreciation	$32.00
Cash paid for SG&A	$161.00

Receivership Inc.
Statement of Cash Flows
For Year Ended December 31, 2018
Particulars	Details	Amount
Cash Flows from operating activities:
Cash collected from customers	$1,351.00
Cash paid for inventory to supplier	-$594.00
Cash paid for rent	-$139.00
Cash paid for Wages	-$156.00
Cash paid for Income Tax	-$57.00
Cash paid for Interest	-$32.00
Cash paid for SG&A	-$161.00
Cash paid for Insurance	-$53.00
Net Cash provided by operating activities		$159.00