Question

Cash Flows from Operating Activities—Direct Method

The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following:

a. If sales for the current year were $509,900 and accounts receivable decreased by $32,600 during the year, what was the amount of cash received from customers?
$

b. If income tax expense for the current year was $44,200 and income tax payable decreased by $4,400 during the year, what was the amount of cash payments for income taxes?
$

c. Briefly explain why the cash received from customers in part (a) is different from sales.
Because the customers paid than the amount of sales for the period, cash received from customers sales made on account by $32,600 during the current year.

Answer 1

A.Cash received from the customers would be that reduced value of $32600+the sales during the year $509900

That is totalling to $542500

Because the account receivable will be reduced only when the amount is paid by the customers or by writting off debts in form of ba debts,,

assuming there are no bad debts ..we can say the reduction is the CASH received ..

you can have a doubt that what about the current year sales?

are they totally cash sales? like that

but no they are not cash sales ,,reduction of receivables is from opening to the closing of the year so it implies all the transaction are included in those,

Hope you got it

B.photo was uploaded

The question was answered this for to get a clairty for you,about what happening behind,

to be strainght ,,when the liability is decreased it might be because of our cash payment or waiver by the income tax authorities usually they wont waive ,,,ofcourse keep an assumption on that..it means we paid i.e 4400 along with the current year tax..

this is what there is

C.I had already explained it above,,that is what the question ,,,what i stated that you might have a doubt ,,,its better do it Point A so i solved it there,

All d best for your semester