Question

1. The following Income Statement and account balance changes apply to this question: Income Statement for...

1.

The following Income Statement and account balance changes apply to this question:

Income Statement for the year:

Sales                                   $1,400,000

Cost of Goods Sold                 810,000

Gross Profit                            $590,000

Operating Expenses               360,000

Net Income before Taxes $230,000

Taxes                                             34,000

Net Income                              $196,000

Account Balance Changes during the year:

Accounts Payable increase                                  $6,000

Prepaid expenses decrease                                          $4,500

Taxes Payable increase                                                  $8,200

Accounts Receivable decrease                                    $24,000

Additions to Accumulated Depreciation                     $76,000

Inventory increase                                               $12,000

Accrued liabilities (e.g., Wages Payable) decrease        $5,000

1. What were cash receipts from sales for the year, using the direct method?

a. $1,412,000.

b. $1,388,000.

c. $1,424,000.

d. $1,376,000.

2.

What was the amount of cash payments for operating expenses this year, using the direct method?

a. $283,500

b. $284,500

c. $274,500

d. $293,500

3. (15)

What was the amount of cash payments for taxes this year, using the direct method?

a. $25,800

b. $51,200

c. $20,800

d. $34,800

4. (20)

What was the amount of cash payments made during the year for inventory purchases, using the direct method?

a. $822,000.

b. $804,000

c. $828,000.

d. $816,000.
Business   Accounting   
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Homework Answers

Answer #1

1. Answer: c $1,424,000

Accounts Receivable decrease $24,000
Add: Sales $1,400,000
Cash receipts from sales $1,424,000

2. Answer: b.$284,500

Operating expense $360,000
Prepaid expense decrease ($4,500)
Accrued liabilities $5,000
Depreciation expense ($76,000)
Cash paid for operating expenses $284,500

3. Answer: a. $25,800

Taxes $34,000
Taxes payable increase ($8,200)
Cash paid for taxes $25,800

4. Answer; d. $816,000

Inventory increase $12,000
Cost of goods sold $810,000
Purchases $822,000
Accounts payable increase ($6,000)
Cash paid for inventory purchases $816,000
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