Complete the operating activities section of the statement of cash flows using the direct method.?

Question

ALISON COMPANY

Income Statement

For the Year Ended November 30, 2008

Sales cr. $7,698,140

Cost of goods sold

Beginning inventory dr. $1,891,730

Purchases dr. 4,391,280

Goods available for sale dr. 6,283,010

Ending inventory dr. 1,403,960

Total cost of goods sold cr. 4,879,050

Gross profit cr. 2,819,090

Operating expenses

Selling expenses dr. 453,840

Administrative expenses dr. 713,110 cr. 1,166,950

Net income $1,652,140

Additional information:

1. Accounts receivable increased $247,630 during the year, and inventory decreased $487,770.

2. Prepaid expenses increased $154,170 during the year.

3. Accounts payable to suppliers of merchandise decreased $341,420 during the year.

4. Accrued expenses payable decreased $106,400 during the year.

5. Administrative expenses include depreciation expense of $91,820.

***Complete the operating activities section of the statement of cash flows using the direct method.***

Answer 1

Cash rec'd from customers = Sales - increase in AR

= $7,698,140 - $247,630 = $7,450,510

Cash paid to suppliers = Purchases + decrease in AP

= $4,391,280 + $341,420 = $4,732,700

Cash paid for op'g expenses = Op'g exp. + increase in prepaid exp. + decrease in accrued exp.

= $1,075,130 + $154,170 + $106,400 = $1,335,700

Direct Method Cash Flow Statement

Cash flows from operating activities

Cash receipts from customers $7,450,510

Cash paid to suppliers and employees $6,068,400

Cash generated from operations $1,382,110