Solutions to Exercise 17-14 Cash Flow Statement.docx

Solutions to Exercise 17-14 Cash Flow Statement.docx -...

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Solutions to Exercise 17-14 (pg 588 – 89) Cash Flow Statement (Direct Method) _ _ _ _ _ _ _ _ _ _ _ Limited For the year ending _ _ _ _ _ _ _ _ _ _ Cash flows from operating activities Cash received from customers $3,560,000 1 Dividend income 4,000 Cash paid for purchases 2,941,000 2 Cash expenses paid 328,000 3 Payment of taxes 122,000 4 Cash interest paid 4,000 5 Cash flow generated from operating activities $ 169,000 For cash flow from investing and financing activities, please refer to the solution under the indirect method, on the following page. 1 Cash received from customers = Sales – increase in accounts receivable= $3,580,000 - $20,000 = $3,560,000. 2 Purchases = COGS + Increase in inventory = $2,864,000 + $60,000 = $2,924,000.Once purchase amount is known, compute payment for purchases as: Payment for purchases = Purchases + Decrease in accounts payable = $2,924,000 + $17,000 = $2,941,000 3 Payment for expenses= Distribution costs + Administrative costs + Other costs + Decrease in other accrued liabilities – non-cash expenses Depreciation and Increase in provision for employee benefits= $185,000 + $160,000 + $40,000 + $2,000 – $55,000 – $4,000 = $328,000 4
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