Question

The following information are offered to you for X Company Account Name 2019 2018 Inventory 65,000...

The following information are offered to you for X Company

Account Name

2019

2018

Inventory

65,000

50,000

Accounts payable

        65,000

55,000

Other information:

·         COGS at 2019 is $35,000.

·         Cash receipts from customers at 2019 is $95,000

·         Cash paid for operating expenses at 2019 is $ 30,000.

Using direct method, the net cash flows from operations are:

Select one:

a. $25,000

b. $40,000

c. $30,000

d. $65,000

e. All answers are wrong

Homework Answers

Answer #1

Cash payment to suppliers = Cost of goods sold + Increase in inventory - Incease in accounts payable

= 35,000 + 15,000 - 10,000

= $40,000

Cash payment for operating expenses = Operating expenses - Decrease in prepaid expenses

Cash payment for income tax = Income tax expense + Decrease in income tax payable

Statement of cash flow – Direct method

Cash flow from operating activities

Cash receipts from customers

95,000

Less: Cash payment to suppliers

- 40,000

Cash payment for operating expenses

- 30,000

Net cash provided by Operating Activities

$25,000

Correct option is (a)

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