Question

The following income statement and information about changes in noncash current assets and current liabilities are reported. SONAD COMPANY Income Statement For Year Ended December 31, 2015 Sales $ 1,521,000 Cost of goods sold 745,290 Gross profit 775,710 Operating expenses Salaries expense $ 208,377 Depreciation expense 36,504 Rent expense 41,067 Amortization expenses—Patents 4,563 Utilities expense 16,731 307,242 468,468 Gain on sale of equipment 6,084 Net income $ 474,552 Changes in current asset and current liability accounts for the year that relate to operations follow. Accounts receivable $ 20,900 increase Accounts payable $ 8,500 decrease Inventory 18,875 increase Salaries payable 1,400 decrease Use the direct method to prepare only the cash provided or used by operating activities section of the statement of cash flows for this company. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

SONAD COMPANY
Statement of Cash Flows (Partial)-Direct Method
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash receipts from customers	1500100
Cash paid for inventory purchases	-772665
Cash paid for salaries	-209777
Cash paid for rent expense	-41067
Cash paid for utilities expense	-16731
Net cash provided by operating activities	459860

Workings:

Cash receipts from customers:
Sales Revenue	1521000
Less: Increase in Accounts Receivable	-20900
	1500100
Cash paid for inventory purchases:
Cost of goods sold	745290
Add: Increase in Inventory	18875
Add: Decrease in Accounts Payable	8500
	772665
Cash paid for salaries:
Salaries expense	208377
Add: Decrease in Salaries Payable	1400
	209777