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Calculating Net Cash Flow from Operating Activities (Indirect Method) Lincoln Company owns no plant assets and...
Calculating Net Cash Flow from Operating Activities (Indirect Method) Lincoln Company owns no plant assets and reported the following income statement for the current year: Sales $750,000 Cost of Goods Sold $470,000 Wages Expense 110,000 Rent Expense 42,000 Insurance Expense 15,000 637,000 Net Income $113,000 Additional balance sheet information about the company follows: End of Year Beginning of Year Accounts Receivable $54,000 $49,000 Inventory 60,000 66,000 Prepaid Insurance 8,000 7,000 Accounts Payable 22,000 18,000 Wages Payable 9,000 11,000 Use the information to a. Calculate the net cash flow from operating activities under the indirect method. $Answer b. Compute Lincoln Company's operating cash flow to current liabilities (OCFCL) ratio. (Assume current liabilities consist of accounts payable and wages payable.) (Round your answer to two decimal places.) Answer
Solutions
Expert Solution
| Ans. | Cash flow from Operating Activities: | |||||||||||
| Net Income | 113000 | |||||||||||
| Add: Decrese in CA & Increase in CL | ||||||||||||
| Inventory (66000-60000) | 6000 | |||||||||||
| Accounts payable (22000-18000) | 4000 | 10000 | ||||||||||
| Less: Increse in CA & Decrease in CL | ||||||||||||
| Accounts receivables (54000-49000) | -5000 | |||||||||||
| Prepaid insurance (8000-7000) | -1000 | |||||||||||
| Wages payable (11000-9000) | -2000 | -8000 | ||||||||||
| Net Cash flow from Operating activities | 115000 | |||||||||||
| Ans.2 | Operating cash flow to current liabilities ratio = Operating cash flow / Average current liabilities | |||||||||||
| OCFCL Ratio = 115000 / 30000 | ||||||||||||
| 3.83 | ||||||||||||
| *Calculation of total average current liabilities ratio: | ||||||||||||
| Accounts payable | 20000 | |||||||||||
| Wages payable | 10000 | |||||||||||
| Total | 30000 | |||||||||||
| *Average of accounts payable: | ||||||||||||
| (22000 + 18000) / 2 = 20000 | ||||||||||||
| *Average of wages payable: | ||||||||||||
| (9000 + 11000) / 2 = 10000 | ||||||||||||
ekkarill92 answered 1 year agoRelated Solutions
Cash Flow from Operating Activities (IndirectMethod)The Lincoln Company owns no plant assets and had...
Cash Flow from Operating Activities (Indirect
Method)The Lincoln Company owns no plant assets and had the following
income statement for the year:Sales revenue$1,050,000Cost of goods sold$658,000Wages expense154,000Rent expense58,800Insurance expense21,000891,800Net income$158,200Additional information about the company includes:End of YearBeginning of YearAccounts receivable$75,600$68,600Inventory84,00092,400Prepaid insurance11,2009,800Accounts payable30,80025,200Wages payable12,60015,400Use the preceding information to calculate the cash flow from
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Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method
19. Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? a depreciation expense b. gain on sale of land c a loss on the sale of equipment d dividends declared and paid 20. Which of the following below increases cash? a depreciation expense b. acquisition of treasury stock c. borrowing money by issuing a six-month note d. the declaration of a cash dividend 21. Which one of the following...
Analyzing Operating Cash Flows (Direct Method) Lincoln Company owns no plant assets and reported the following...
Analyzing Operating Cash Flows (Direct
Method)
Lincoln Company owns no plant assets and reported the following
income statement for the current year:
Sales
$750,000
Cost of goods sold
$470,000
Wages expense
110,000
Rent expense
42,000
Insurance expense
15,000
637,000
Net income
$113,000
End of Year
Beg. of Year
Accounts receivable
$54,000
$49,000
Inventory
60,000
66,000
Prepaid insurance
8,000
7,000
Accounts payable
22,000
18,000
Wages payable
9,000
11,000
Calculate the net cash flow from operating activities using the
direct method. Show...
Analyzing Operating Cash Flows (Direct Method) Lincoln Company owns no plant assets and reported the following...
Analyzing Operating Cash Flows (Direct Method)
Lincoln Company owns no plant assets and reported the following
income statement for the current year:
Sales
$600,000
Cost of goods sold
$376,000
Wages expense
88,000
Rent expense
33,600
Insurance expense
12,000
509,600
Net income
$90,400
End of Year
Beg. of Year
Accounts receivable
$59,400
$53,900
Inventory
66,000
72,600
Prepaid insurance
8,800
7,700
Accounts payable
24,200
19,800
Wages payable
9,900
12,100
Calculate the net cash
flow from operating activities using the direct method. Show...
Operating Cash Flows (Direct Method) Lincoln Company owns no plant assets and reported the following income...
Operating Cash Flows (Direct Method)
Lincoln Company owns no plant assets and reported the following
income statement for the current year:
Sales
$ 780,000
Cost of goods sold
$ 430,000
Wages expense
90,000
Rent expense
38,000
Insurance expense
14,000
572,000
Net income
$ 208,000
Additional balance sheet information about the company follows:
End of Year
Beginning of Year
Accounts receivable
$ 53,000
$ 49,000
Inventory
60,000
65,000
Prepaid insurance
8,000
7,000
Accounts payable
20,000
18,000
Wages payable
9,000
10,000
Calculate...
1. When using the Indirect method or the direct method, net cash flows from operating activities...
1. When using the Indirect method or the direct method, net cash
flows from operating activities will never be the same! True or
False and please explain.
2. Please provide three examples of items you believe could be
classified as extraordinary losses and tell me why.
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End of Year
Beginning of Year
Cash
$47,100
$42,860
Accounts receivable (net)
33,770
31,670
Inventories
46,110
48,220
Prepaid expenses
5,180
4,070
Accounts payable (merchandise creditors)
44,130
40,550
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Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
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The net income reported on the income statement for the current
year was $313,300. Depreciation recorded on equipment and a
building amounted to $93,700 for the year. Balances of the current
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the year are as follows:
End of Year
Beginning of Year
Cash
$78,330
$81,460
Accounts receivable (net)
99,320
100,520
Inventories
195,830
173,180
Prepaid expenses
10,890
11,490
Accounts payable (merchandise creditors)
87,490
90,910...
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The net income reported on the income statement for the current
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year amounted to $20,900. Balances of the current asset and current
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End of Year
Beginning of Year
Cash
$48,220
$44,360
Accounts receivable (net)
34,570
32,780
Merchandise inventory
47,210
49,910
Prepaid expenses
5,300
4,210
Accounts payable (merchandise creditors)
45,180
41,960
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Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
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The net income reported on the income statement for the current
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End of Year
Beginning of Year
Cash
$71,730
$74,600
Accounts receivable (net)
90,950
92,060
Inventories
179,330
158,600
Prepaid expenses
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10,520
Accounts payable (merchandise creditors)
80,120
83,250...
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