Question

Use the information below to prepare a Statement of Cash Flow for Bob's Bargain Shop. You need to prepare the statement using both the direct method and the indirect method for the operating section.

Answer 1

Bob's Bargain Shop Cashflow Statement - Direct method Calculation 304,000 Cash flows from Operating Activities Cash receipts Cash received from customers Cash payments Cash paid to suppliers Cash paid for Salaries Cash paid for Utilities Cash paid for Interest Total cash payments Net Cash Provided/(Used) by Operating Activities 154,400 83,000 7,000 3,400 247,800 56,200 Cash flows from Investing Activities Proceeds from collection of notes receivable Proceeds from sale of equipment Purchase of Land Net Cash Provided/(Used) by Investing Activities 16,000 15,200 (16,000) Wkgs below =30,000-46,000 15,200 =150,000-110,000 40,000 (24,000) (7,200) =108,700-48,600-67,300 Cash flows from Financing Activities Proceeds from issue of common stock Repayment of Long-Term Notes payable Dividends paid Net Cash Provided/(Used) by Financing Activities Net Change in Cash Cash at Beginning of Period Cash at End of Period 8,800 80,200 14,100 94,300 72,000 =170,000-98,000 Workings Proceeds from sale of equipment Cost of equipment sold Accumulated Depreciation on equipment sold Opening Balance Depreciation expense Less Ending Balance Accumulated Depreciation on equipment sold Book Value of equipment sold Loss on sale of equipment Proceeds from sale of equipment 94,000 9,800 (47,800) 56,000 16,000 800 15,200 -16,000-800

Workings Cashflow Statement - Direct method Cash flows from Operating Activities Cash Receipts Sales Opening Accounts Receivable Closing Accounts Receivable Cash received from customers 300,000 40,000 (36,000) 304,000 Cash payments Cost of goods sold Opening Accounts Payable Closing Accounts Payable Closing Inventory Opening Inventory Cash paid to Suppliers 144,000 26,400 (24,000) 72,000 (64,000) 154,400 Salaries expenses Opening Salaries payable Closing Salaries payable Cash paid for Salaries 88,000 10,000 (15,000) 83,000 Utilities expense Opening Utilities Payable Closing Utilities Payable Cash paid for Utilities 6,400 1,400 (800) 7,000 2,400 1,000 Interest expense Opening Interest payable Closing Interest payable Cash paid for Interest Total Cash payments Net Cash Provided/(Used) by Operating Activities 3,400 247,800 56,200

Bob's Bargain Shop Cashflow Statement - Indirect method Calculation Cash flows from Operating Activities Net income 48,600 Adjustments to reconcile net income to net cash from operating activities Loss on sale of equipment 800 Depreciation expense 9,800 Changes in operating assets and liabilities Decrease in Accounts Receivable 4,000 Increase in Inventory (8,000) Decrease in Accounts Payable (2,400) Increase in Salaries Payable 5,000 Decrease in Utilities Payable (600) Decrease in Interest Payable (1,000) Total adjustments 7,600 Net Cash Provided/(Used) by Operating Activities 56,200 =40,000-36,000 =64,000-72,000 =24,000-26,400 =15,000-10,000 =800-1,400 =0-1,000 Cash flows from Investing Activities Proceeds from collection of notes receivable Proceeds from sale of equipment Purchase of Land Net Cash Provided/(Used) by Investing Activities 16,000 15,200 (16,000) 15,200 Cash flows from Financing Activities Proceeds from issue of common stock Repayment of Long-Term Notes payable Dividends paid Net Cash Provided/(Used) by Financing Activities Net Change in Cash Cash at Beginning of Period Cash at End of Period 40,000 (24,000) (7,200) 8,800 80,200 14,100 94,300