Question

Outdoor Paints Company uses the direct method for preparing its statement of cash flow. Outdoor reports the following information regarding 2019. From the income statement: Sales Revenues, $270,000 Cost of Goods Sold, $213,000 Operating Expenses, $31,000 From the balance sheet: Beginning Balance $15,000 24,200 Accounts Receivable Merchandise Inventory Accounts Payable Accrued Liabilities Ending Balance $18,200 18,300 13,800 1,600 6,900 4,700 O A. $35,700 OB. $31,000 OC. $34,100 OD. $29.400

Answer 1

Amount ($) Outdoor Paints Company Cash Flow Statement for the Year Ending 31st Dec, 2019 Direct Method Particulars Cash Flow From Operating Activities Cash Received From Sales ( W Note 1) Less : Cash paid for Purchases (W Note 3) Less Cash paid for operating Expenses (W Note 4) Net Cash Flow From Operating Activities 266,800 (200,200) (34,100) 32,500 - Working Note 1 Calculation of Cash Received from Sales - Account Receivable (Beginning) Add : Sales during the Year - Total Less: Accounts Receivable (Ending) Cash Received From Sales 15,000 270,000 285,000 (18,200) 266,800 Working Note 2 Calculation of Total Purchases - Merchandise Inventory (Ending) - Add: Cost of goods sold - Total Less : merchandise inventory (Beginning) Purchases During the period 18,300 213,000 231,300 (24,200) 207,100

- Working Note 3 Calculation of Cash paid for Purchases Account Payable (Begining) Add : Purchases during the period (W note 2) Total Less : Account Payable (Ending) - Cash paid for Purchases 6,900 207,100 214,000 (13,800) 200,200 Working Note 4 Calculation of Cash paid for operating expenses Accrued Liabilities (Beginning) - Add : Operating expenses for the year Total Less : Accrued liabilities (Ending) Cash paid for operating expenses 4,700 31,000 35,700 (1,600) 34,100 Net Cash Flow From Operating Activities - Cash paid for operating expenses 32,500 34,100

A 5 Solution 2 6 Cash Flow From Investing Activities -7 Purchase of Equipment (15,000) 9 Ans: B. $15000 would be shown as a negative cash flow in the investing activities section