Question

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

1) 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

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