9004000wagespaid 3100

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Unformatted text preview: ­’07) $44,642 2008 cash payments (67) E14–13 1. Direct method The first step in calculating the cash flows from operating activities is to calculate the cash inflows and outflows associated with each income statement account. These calculations are given below. Cash collections from customers: Cash collections from customers = Sales – Ending accounts receivable + Beginning accounts receivable + Ending deferred revenues – Beginning deferred revenues = $48,000 – $4,000 + $5,000 + $0 – $3,000 = $46,000 Cash paid for inventory: a. Inventory purchased 2012 Ending inventory $9,000 Net purchases b. = 2012 Beginning inventory + Net inventory purchased during 2012 – 2012 Cost of goods sold = $11,000 + Net purchases – $30,000 = $28,000 Disbursements for inventory 2012 Ending accounts payable $3,000 Payments Cash paid for wages: 2012 Ending wages payable $1,800 Wages paid Cash paid for advertising: 2012 Ending prepaid advertising $3,000 Advertising paid = 2012 Beginning accounts payable + Net inventory purchased during 2012 – Payments for inventory during 2012 = $4,000 + $28,000 – Payments = $29,000 = 2012 Beginning wages payable + 2012 Wage Expense – Wages paid during 2012 = $900 + $4,000 – Wages paid = $3,100 = 2012 Beginning prepaid advertising + Advertising paid – 2012 Advertising expense = $1,200 + Advertising paid – $1,000 = $2,800 Cash flows from operating activities: Cash collections from customers Payments for inventory Payments for wages Payments for advertising Net cash increase due to operating activities $ $ 46,000 (29,000) (3,100) (2,800) 11,100 E14–13 Concluded 2. Indirect method Cash flows from operating activities: Net income 11,000 Adjustments: Depreciation Decrease in accounts receivable Decrease in inventory Increase in wages payable Increase in prepaid advertising Decrease in deferred revenues Decrease in accounts payable Total adjustments Net cash increase due to operating activities 11,100 $ $ 2,000 1,000 2,000 900 (1,800)...
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This homework help was uploaded on 03/03/2014 for the course ACCT 5053 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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