Question

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Peach Computers. PEACH COMPUTERS Income Statement For the Year Ended December 31, 2018 Sales $ 440.0 Cost of goods sold (220.0 ) Gross margin 220.0 Salaries expense $ 51.0 Insurance expense 28.0 Depreciation expense 13.0 Loss on sale of land 11.0 103.0 Income before tax 117.0 Income tax expense (58.5 ) Net income $ 58.5 Reconciliation of Net Income To Net Cash Flows from Operating Activities Net income $ 58.5 Adjustments for noncash effects: Depreciation expense 13.0 Loss on sale of land 11.0 Changes in operating assets and liabilities: Decrease in accounts receivable 15.0 Increase in inventory (58.0 ) Decrease in accounts payable (35.0 ) Increase in salaries payable 23.0 Decrease in prepaid insurance 13.5 Increase in income tax payable 54.7 Net cash flows from operating activities $ 95.7 Required: Calculate each of the following amounts for Peach Computers.  Prepare the cash flows from operating activities section of the statement of cash flows (direct method).

Enter your answers in millions rounded to one decimal place (i.e., 5,500,000 should be entered as 5.5). Cash outflows must be indicated with a minus sign.)

Answer 1

PEACH COMPUTERS
STATEMENT OF CASH FLOWS (DIRECT METHOD)
			($ in Millions)
Cash flows from operating activities	Remarks
Cash receipts from customers	See Note 1	$455.00
Cash paid to suppliers	See Note 2 & 3	-$313.50
Cash paid to employees	See Note 4	-$28.00
Cash paid for expenses	See Note 5	-$14.50
Cash generated from operations		$99.00
Income taxes paid	See Note 6	-$3.80
Net cash from operating activities			$95.20
Notes
Computation of Cash Receipts from Customers
Sales Revenue	$440.00
Add: Decrease in accounts receviable	$15.00
Net Cash Receipts from Customers	$455.00
Computation of Amount of Purchases
Cost of Goods sold	$220.00
Add: Increase in inventory	$58.50
Purchases	$278.50
Computation of Cash Payment to Suppliers
Purchases (see note 2)	$278.50
Add: Decrease in accounts payable	$35.00
Cash Payments to Suppliers	$313.50
Computaion of Cash paid for salaries
Salaries Expenses	$51.00
Less:- Increase in Salaries payable	-$23.00
Cash payment of Salaries	$28.00
Computaion of Cash paid for insurance expense
Insurance Expenses	$28.00
Less:- Decrease in Prepaid Insurance	-$13.50
Cash payment for insurance expense	$14.50
Computation of Income Tax paid in cash
Income Tax expense	$58.50
Less:- Increase in Income tax payable	-$54.70
Cash payment of Income Taxes	$3.80