AFM101 Final_Review

AFM101 Final_Review - P5-3 Comparing Cash Flows from...

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Unformatted text preview: P5-3 Comparing Cash Flows from Operating Activities (Direct and Indirect Method)Beta Companys accountants just completed the financial statements for the year and have provided the following information (in thousands):Income Statement for 2005Selected Balance Sheet Accounts20042005Sales Revenue$20,600Merchandise Inventory$ 60$ 82Expenses and LossesAccounts Receivable450380Cost of Goods Sold$9,000Accounts Payable210240Amortization2,000Salaries Payable2029Salaries5,000Rent Payable62Rent2,500Prepaid Rent72Insurance800Prepaid Insurance514Utilities700Interest60020,600Net IncomeOther Data: The company signed long-term notes for $20,000 during the year.Required:Prepare the operating activities section of the cash flow statement for 2005 using: the direct method and the indirect methodBETA COMPANYCash Flows from Operating ActivitiesDirect MethodCash flows from operating activities:Cash receipts from customers..................................................................$20,670 Cash payments: .......................................................................................To suppliers........................................................................................(8,992)For salaries.........................................................................................(4,991)For rent...............................................................................................(2,499)For insurance......................................................................................(809)For utilities..........................................................................................(700)For interest.........................................................................................(600)Net cash provided by operating activities........................................$ 2,079Receipts from Customers = Sales Revenue + Beg. A/R End A/R = 20,600 + 450 380 = 20,670Payments to Suppliers = Cost of Goods Sold + End. Inv. Beg. Inv. + Beg. A/P End A/P= 9,000 + 82 60 + 210 240 = 8,992Payments for Salaries= Salary Expense + Beg. Salary Payable End Salary Payable= 5,000 + 20 29 = 4,991Payments for Rent= Rent Exp. + End PP Rent Beg. PP Rent + Beg Rent Pay End Rent Pay= 2,500 + 2 7 + 6 2 = 2,499Payments for Insurance= Insurance Exp. + End PP Insurance Beg. PP Insurance= 800 + 14 5 = 809Payments for Utilities= Utility Exp. + Beg. Utility Payable End Utility Payable= 700 + 0 0 = 700Payments for Interest= Interest Expense + Beg. Interest Payable End Interest Payable= 600 + 0 0 = 600BETA COMPANYCash Flows from Operating ActivitiesIndirect MethodCash flows from operating activities:Net income.......................................................................$ (0)Adjustments to reconcile net income to net cash provided byOperating activities:Amortization expense.....................................................Amortization expense....
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This note was uploaded on 07/12/2010 for the course AFM 101 taught by Professor Kennedy during the Winter '08 term at Waterloo.

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AFM101 Final_Review - P5-3 Comparing Cash Flows from...

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