Question

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in 000s) for Peach Computers.

PEACH COMPUTERS Income Statement For the Year Ended December 31, 2018
Sales					$	530.0
Cost of goods sold						(318.0	)
Gross margin						212.0
Salaries expense	$	63.0
Insurance expense		40.0
Depreciation expense		19.0
Loss on sale of land		17.0				139.0
Income before tax						73.0
Income tax expense						(36.5	)
Net income					$	36.5

Reconciliation of Net Income To Net Cash Flows from Operating Activities
Net income	$	36.5
Adjustments for Noncash Effects
Depreciation expense		19.0
Loss on sale of land		17.0
Changes in operating assets and liabilities:
Decrease in accounts receivable		21.0
Increase in inventory		(88.0	)
Decrease in accounts payable		(53.0	)
Increase in salaries payable		35.0
Decrease in prepaid insurance		16.5
Increase in income tax payable		31.5
Net cash flows from operating activities	$	35.5

Required:
1. Calculate each of the following amounts for Peach Computers:
2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).

Answer 1

Cash Flow Statement
Direct Method
Cash flow from Operating Activities
Cash Collected from Customers	$             551.00	=530+21
Cash paid to suppliers	$            -459.00	=-(318+88+53)
Cash paid for salaries	$              -28.00	=-(63-35)
Cash paid for Insurance	$              -23.50	=-(40-16.5)
Cash paid for income tax	$                -5.00	=-(36.5-31.5)
Cash from operating activities	$               35.50