Question

Sheridan Ltd. reported the following for the fiscal year 2021: SHERIDAN LTD. Income Statement Year Ended September 30, 2021 Sales $566,000 Cost of goods sold 321,000 Gross profit 245,000 Operating expenses $ 92,000 Depreciation expense 17,000 Gain on sale of land (27,000 ) 82,000 Profit before income tax 163,000 Income tax expense 40,750 Profit $122,250 Additional information:

1. Accounts receivable decreased by $14,600 during the year. 2. Inventory increased by $6,100 during the year. 3. Prepaid expenses decreased by $4,100 during the year. 4. Accounts payable to suppliers increased by $9,600 during the year. 5. Accrued expenses payable increased by $3,600 during the year. 6. Income tax payable decreased by $5,400 during the year.

Prepare the operating activities section of the cash flow statement using the direct method

Answer 1

Operating Activities :
Cash received from Customers	$580,600
Cash paid to supplier	$317,500
Cash paid for Operating Expense	$84,300
Cash paid for Income Tax	$46,150
Cash inflow from Operating Activities	$132,650

Explanations :-

Cash received from Customers
Sales	$566,000
Add: Account Receivable Decrease	$14,600
	$580,600
Cash paid to supplier
Cost of Goods sold	$321,000
Add: Inventory Increased	$6,100
Less: Increase Account Payable	$9,600
	$317,500
Cash paid for Operating Expense
Operating Expense	$92,000
Less: Prepaid Expense Decrease	$4,100
Less: Accrued Expense Increase	$3,600
	$84,300
Cash paid for Income Tax
Income tax expense	$40,750
Add: Income Tax Payable Decrease	$5,400
	$46,150