Question

Cash Flows from Operating Activities—Direct Method The income statement of Booker T Industries Inc. for the...

Cash Flows from Operating Activities—Direct Method

The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Sales $550,000
Cost of merchandise sold 312,300
Gross profit $237,700
Operating expenses:
Depreciation expense $42,210
Other operating expenses 111,580
Total operating expenses 153,790
Income before income tax $83,910
Income tax expense 23,270
Net income $60,640

Changes in the balances of selected accounts from the beginning to the end of the current year are as follows:

Increase/ Decrease*
Accounts receivable (net) $12,190*
Inventories 4,240
Prepaid expenses 4,060*
Accounts payable (merchandise creditors) 8,670*
Accrued expenses payable (operating expenses) 1,210
Income tax payable 2,910*

a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Booker T Industries Inc.
Cash Flows from Operating Activities Section
For the year ended on June 30
Cash flows from operating activities:
Cash received from customers ----------------?? $
Cash payments for merchandise ----------------?? $
Cash payments for operating expenses -------------??
Cash payments for income taxes ---------------------??

Homework Answers

Answer #1
Cash Receipt From Customer
Sales 550000
Add: Decrease in Account Receivable 12190
Cash Receipt from Customer 562190
Cost of Goods Sold 312300
Add; Decrease in Account Payable 8670
Add: Increase in Inventory 4240
Cash Paid to Supplies 325210
Cash payment for Operating Expense
Other Operating Expense 111580
Less: Decrease in prepaid Expense -4060
Less: Increase in op Expense -1210
106310
Cash payment for Income Tax
Income Tax Expense 23270
Add: Decrease in Income Tax Payable 2910
Cash Payment for Tax 26180
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