Question

Paddleboard Inc. began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016 and 2017, is shown below along with some other information.

Paddleboard Inc.
Income Statement
For Year Ended December 31, 2017
(000s)
Revenues:
Sales		$3,814
Cost of goods sold		1,566
Gross Profit		2,248
Expenses:
Other expenses	$850
Depreciation expense	110
Total operating expenses		960
Profit from operations		1,288
Income tax expense		288
Profit		$1,000

Paddleboard Inc.
Post-Closing Trial Balance
(000s)
	December 31
Account	2017	2016
Cash	$3,180	$1,870
Receivables	2,820	2,110
Merchandise inventory	2,590	3,160
Property, plant and equipment	3,070	2,750
Accumulated depreciation	1,950	1,840
Investments	2,110	2,270
Accounts payable	1,950	1,470
Accrued liabilities	320	480
Bonds payable	2,530	2,700
Common shares	3,070	2,600
Retained earnings	3,950	3,070

Other information:
a. All accounts payable balances result from merchandise purchases.
b. All sales are credit sales.
c. All credits to accounts receivable are receipts from customers.
d. All debits to accounts payable result from payments for merchandise.
e. All other expenses are cash expenses.

Required:
Prepare a statement of cash flows for 2017 using the direct method to report cash inflows and outflows from operating activities. (List any deduction in cash and cash outflows as negative amounts. Enter amounts in thousands, not in dollar.)

Answer 1

	Direct method of determining the net cashflows from operating activities:
						in '000s	in '000s
	Sales					3814
	Adjustment to cash basis
	Beginning balance of receivables					2110
	Ending balance of accounts receivable					-2820	3104
	Cost of goods sold					1566
	Adjustment to cash basis
	Decrease in inventory (3160-2590)					-570
	Beginning balance of accounts Payable					1470
	Ending balance of accounts Payable					-1950	-516
	Other expenses					850
	Adjustment to cash basis
	Decrease in accrued liabilities (480-320)					160	-1010
	Income taxes						-288
	Cashflow from operating activities						1290