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M12-12 Computing Cash Flows from Operating Activit

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Answer #1

Case A

Cash Collected from Customer = Sales Revenue + Accounts Receivable Decrease

..................................................= $53,000 + $1,000

..................................................= $54,000

Purchases done during the year = Cost of Goods Sold + Inventory Increase

....................................................= $36,500 + $2,300

....................................................= $38,800

Cash Payment to Suppliers = Purchases

.............................................= $38,800

Cash Payments for Operating Expenses = Other Operating expense - Operating Expense Payable Increase

.................................................................= $5,300 - $1,650

.................................................................= $3,650

Net Cash Provided by Operating Activities = Cash Collected from Customer - Cash Payment to Suppliers - Cash Payments for Salaries and Wages

....................................................................= $54,000 - $38,800 - $3,650

....................................................................= $11,550

Case B

Cash Collected from Customer = Sales Revenue - Accounts Receivable Increase

..................................................= $58,000 - $4,300

..................................................= $53,700

Purchases done during the year = Cost of Goods Sold

....................................................= $27,500

Cash Payment to Suppliers = Purchases - Account Payable Increase

.............................................= $27,500 - $2,800

.............................................= $24,700

Cash Payments for Operating Expenses = Other Operating expense + Operating Expense Payable Decrease

.................................................................= $13,300 + $2,300

.................................................................= $15,600

Net Cash Provided by Operating Activities = Cash Collected from Customer - Cash Payment to Suppliers - Cash Payments for Salaries and Wages

....................................................................= $53,700 - $24,700 - $15,600

....................................................................= $13,400

Case C

Cash Collected from Customer = Sales Revenue - Accounts Receivable Increase

..................................................= $99,000 - $3,300

..................................................= $95,700

Purchases done during the year = Cost of Goods Sold - Inventory Decrease

....................................................= $66,500 - $3,300

....................................................= $63,200

Cash Payment to Suppliers = Purchases + Account Payable Decrease

.............................................= $63,200 + $1,000

.............................................= $64,200

Cash Payments for Operating Expenses = Other Operating expense - Operating Expense Payable Increase

.................................................................= $8,300 - $1,000

.................................................................= $7,300

Net Cash Provided by Operating Activities = Cash Collected from Customer - Cash Payment to Suppliers - Cash Payments for Salaries and Wages

....................................................................= $95,700 - $64,200 - $7,300

....................................................................= $24,200

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