Question

The following accounts and corresponding balances were drawn from Avia Company’s Year 2 and Year 1 year-end balance sheets:

Account Title	Year 2			Year 1
Unearned revenue	$	7,000		$	4,900
Prepaid rent		1,490			2,500

During the year, $72,000 of unearned revenue was recognized as having been earned. Rent expense for Year 2 was $17,500.

Required
Based on this information alone, prepare the operating activities section of the statement of cash flows assuming the direct approach is used. (Amounts to be deducted should be indicated with a minus sign.)
  

equired
Based on this information alone, prepare the operating activities section of the statement of cash flows assuming the direct approach is used. (Amounts to be deducted should be indicated with a minus sign.)
  

Cash from operating expenses

1.__________________ __________

2.__________________ ___________

3.__________________ _____________

Net cash flow from operating expenses: $________
  

Answer 1

	Year 2	Year 1
Unearned revenue	7,000	4,900
Prepaid rent	1,490	2,500

Revenue earned during year 2 = $72,000

Rent expense for year 2 = $17,500

Cash received for revenue = Revenue earned during year 2 + Increase in unearned revenue

= 72,000 + (7,000 - 4,900)

= 72,000 + 2,100

= $74,100

Cash paid for rent expense = Rent expense for year 2 - Decrease in prepaid rent

= 17,500 - (2,500 - 1,490)

= 17,500 - 1,010

= $16,490

Cash flow from operating activities

Cash received for revenue	74,100
Cash paid for rent expense	-16,490
Net cash flow from operating activities	$57,610