Question

Use the following calendar-year information to prepare Ibrahim Company's statement of cash flows using the direct method: (4 Points)

Cash paid to purchase machinery	$ 124,000
Cash paid for merchandise inventory	220,000
Cash paid for operating expenses	280,000
Cash paid for interest	4,000
Cash received for interest	10,000
Cash proceeds from sale of land	100,000
Cash balance at beginning of year	15,000
Cash balance at end of year	77,000
Cash borrowed on a short-term note	25,000
Cash dividends paid	24,000
Cash received from stock issuance	57,000
Cash collections from customers	522,000

Answer 1

SOLUTION

Cash flow statement- Direct method

Particulars	Amount ($)
Cash flow from Operating activities-
Cash paid for merchandise inventory	(220,000)
Cash paid for operating expenses	(280,000)
Cash paid for interest	(4,000)
Cash collections from customers	522,000
Net cash flow from operating activities (A)	18,000
Cash flow from Investing activities-
Cash paid to purchase machinery	(124,000)
Cash received for interest	10,000
Cash proceeds from sale of Land	100,000
Net cash used in invetsing activities (B)	(14,000)
Cash flow from Financing activities-
Cash borrowed on short term note	25,000
Cash dividend paid	(24,000)
Cash received from stock issuance	57,000
Net cash flow from financing activities (C)	58,000
Net increase in cash (A+B+C)	62,000
Beginning cash balance	15,000
Ending cash balance	77,000