Question

consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary follow:

Palano Company and Subsidiary Consolidated Income Statement for the Year Ended December 31, 2015
Sales				$699,800
Cost of sales				263,100
Gross profit				436,700
Operating expenses:
Depreciation expense		$76,100
Selling expenses		122,200
Administrative expenses		83,500		281,800
Consolidated net income				154,900
Less noncontrolling interest in consolidated net income				38,725
Controlling interest in consolidated net income				$116,175

		December 31
		2014		2015
Accounts receivable		$229,451		$323,275
Inventory		196,258		233,183
Prepaid selling expenses		25,825		30,510
Accounts payable		99,830		80,168
Accrued selling expenses		95,271		84,847
Accrued administrative expenses		56,158		38,382

(a) Prepare the cash flow from operating activities section of a consolidated statement of cash flows assuming use of the Direct method

Answer 1

Cash Flow from Operating Activity :-

Cash flow from operating activity :-	Amount($)
Cash Received from Customers ($229451+$699800-$323275)	605976
Cash Paid for Merchandise ($99830+$300025-$80168)	(319687)
Cash Paid for Selling Expenses (Calculation Below)	(137309)
Cash Paid for Administrative Expenses ($56158+$83500-38382)	(101276)
Net Cash Flow from Operating Activity	47704

Calculation of Purchase = Cost of Sale + ending Inventory - Beginning Inventory

= $263100 + $233183 - $196258

= $300025

Cash Paid for Selling Expenses = Ending Prepaid Selling Exp.+ Beginning Accrued Selling Exp + Currnet Selling Exp.- Beginning Prepaid Selling Exp - Ending Accrued Selling Exp.

= $30510+$95271+$122200-$25825-$84847

= $137309