Question

The following information is available from Dust Corporation’s accounting records for the year ended December 31,...

The following information is available from Dust Corporation’s accounting records for the year ended December 31, 2019:

Cash received from customers

$620,000

Investment revenue recognized

30,000

Cash paid to suppliers and employees

510,000

Advertising Expense

95,000

Cash dividends paid

30,000

Depreciation of fixed assets

15,000

Bad debt expense

12,500

Required:

  1. Compute cash flow provided by operations for 2019.
  2. Justify the exclusion of any of the above items from calculating cash flow from operating activities?

Homework Answers

Answer #1

(A) Operating cash flow - cash flow from the normal working of a business. Cash generated from the operating activities of the business. There are 2 methods, direct method and indirect method.

Under the direct method, we take cash receipts and subtract the cash expenses incurred for operating segment.

Under the indirect method, we take the net income and make it operating cash flow by removing the effect of noncash item, expenses & income not of operating nature.

As per the given information, we can calculate the operating cash flow by direct method since we are not given information about Net Income.

Cash flow from operation for the year 2019 = Cash received from customers - Cash paid to suppliers and employees = 620,000 - 510,000 = $ 110,000

(B) Items excluded

Investment revenue recognized - this is an item of investing activity. The nature is not operating

Advertising Expense - this is not an operating expenses. Operating expenses are those which pertain to the main business/core functions of the business

Cash dividend paid - this is an item of financing activity

Depreciation of fixed asset - this is non cash expense, would have been used in case we applied Indirect method to compute operating cash flow

Bad debt expense - This expenses would have been taken into account if we had applied Indirect method to compute operating cash flow.

( if you have any query, please post in the comment I will reply in the comments)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The following information is available from Bromfield Co.’s accounting records for the year ended December 31,...
The following information is available from Bromfield Co.’s accounting records for the year ended December 31, 2019 (amounts in millions): Cash dividends declared and paid $ 329 Interest and taxes paid 68 Collections from customers 1,332 Payment of long-term debt 212 Purchase of land and buildings 160 Cash paid to suppliers and employees 835 Issuance of preferred stock 311 Proceeds from the sale of equipment 53 Required: Calculate the net cash provided (used) by operating activities for Bromfield Co. for...
The following information is available from Bromfield Co.’s accounting records for the year ended December 31,...
The following information is available from Bromfield Co.’s accounting records for the year ended December 31, 2019 (amounts in millions): Cash dividends declared and paid $ 339 Interest and taxes paid 105 Collections from customers 1,339 Payment of long-term debt 218 Purchase of land and buildings 166 Cash paid to suppliers and employees 832 Issuance of preferred stock 311 Proceeds from the sale of equipment 52 Required: Calculate the net cash provided (used) by operating activities for Bromfield Co. for...
The following information is available from the accounting records of Manahan Co. for the year ended...
The following information is available from the accounting records of Manahan Co. for the year ended December 31, 2019: Net cash provided by financing activities $ 124,000 Dividends paid 19,600 Loss from discontinued operations, net of tax savings of $49,400 148,200 Income tax expense 25,427 Other selling expenses 14,100 Net sales 644,300 Advertising expense 47,900 Accounts receivable 60,500 Cost of goods sold 367,251 General and administrative expenses 142,400 Required: a. Calculate the operating income for Manahan Co. for the year...
The following information is available from the accounting records of Manahan Co. for the year ended...
The following information is available from the accounting records of Manahan Co. for the year ended December 31, 2019: Net cash provided by financing activities $ 101,000 Dividends paid 19,300 Loss from discontinued operations, net of tax savings of $40,200 120,600 Income tax expense 27,817 Other selling expenses 10,800 Net sales 643,900 Advertising expense 45,600 Accounts receivable 58,700 Cost of goods sold 367,023 General and administrative expenses 141,000 MANAHAN CO. Operating Income Statement For the year ended December 31, 2019...
The following information is available from Gray Co.'s accounting records for the year ended December 31,...
The following information is available from Gray Co.'s accounting records for the year ended December 31, 2016 (amounts in millions): Cash dividends declared and paid $ 525 Retirement of bonds payable at maturity 300 Interest and taxes paid 220 Proceeds of common stock issued 825 Proceeds from the sale of land 250 Collections from customers 4,720 Cash paid to suppliers and employees ? Purchase of buildings and equipment ? a. The net cash provided by operating activities for Gray Co....
The following information is available from the accounting records of Manahan Co. for the year ended...
The following information is available from the accounting records of Manahan Co. for the year ended December 31, 2016: Net cash provided by financing activities $ 107,000 Dividends paid 19,900 Loss from discontinued operations, net of tax savings of $45,033 135,100 Income tax expense 28,168 Other selling expenses 10,400 Net sales 646,000 Advertising expense 45,800 Accounts receivable 59,800 Cost of goods sold 368,220 General and administrative expenses 141,100 a. Calculate the operating income for Manahan Co. for the year ended...
The following account balances and other information are from SUNN Corporation’s accounting records for year-end December...
The following account balances and other information are from SUNN Corporation’s accounting records for year-end December 31 2019. Use this information to prepare a (A) table listing factory overhead costs, (B) a schedule of cost of goods manufactured and (C) an Income statement. Inventories : $’000 $’000 Finished goods inventory Dec. 31 2018 Finished goods inventory Dec. 31 2019 15,000 12,500 Sales 1,750,000 Work in process inventory Dec. 31 2018 Work in process inventory Dec. 31 2019 8,000 9,000 Depreciation...
The following information is available from the accounting records of Spenser Co. for the year ended...
The following information is available from the accounting records of Spenser Co. for the year ended December 31, 2019: Selling, general, and administrative expenses $ 45,900 Accounts payable 76,500 Research and development expenses 33,300 Loss from discontinued operations, net of tax savings of $4,500 14,400 Provision for income taxes 66,600 Net sales 521,100 Interest expense 57,600 Net cash provided by operations 133,200 Cost of goods sold 244,800 a. Calculate the operating income for Spenser Co. for the year ended December...
The following information was taken from the records of Valentine Corporation for the year ended December...
The following information was taken from the records of Valentine Corporation for the year ended December 31, 2016. Advertising expense $40,000 Income tax expense 26,000 Accounts payable 26,900 Dividends paid 30,000 Retained earnings (Jan 1, 2016) 115,720 Consulting fees revenue 200,000 Rent expense 23,400 Supplies expense 33,800 The retained earnings reported by Valentine Corporation as of December 31, 2016 is: A. $158,490 B. $111,590 C. $162,520 D. $158,090
Red Ox Corporation’s net income for the year ended December 31, 20X4, was $128,000. Red Ox...
Red Ox Corporation’s net income for the year ended December 31, 20X4, was $128,000. Red Ox has elected to report any interest paid as operating activities and any dividends paid as financing activities. Additional data for the 20X4 fiscal year is as follows: Red Ox issued a bond for $95,000. Depreciation expense for the 20X4 fiscal year was $12,000. The balance for the company’s bank loan as at December 31, 20X3, was $240,000. The balance as at December 31, 20X4,...