Question

The income statement for Rhino Company for the current year ended June 30 is as follows: 1 Sales $440,800.00 2 Cost of merchandise sold 154,500.00 3 Gross profit $286,300.00 4 Operating expenses: 5 Depreciation expense $39,000.00 6 Other operating expenses 115,110.00 7 Total operating expenses 154,110.00 8 Income before income tax $132,190.00 9 Income tax expense 40,330.00 10 Net income $91,860.00 The balances of selected accounts at the beginning and the end of the current year are as follows: End Beginning of Year of Year Accounts receivable (net) $36,340 $30,940 Inventories 92,890 80,000 Prepaid expenses 15,580 16,440 Accounts payable (merchandise creditors) 67,180 62,180 Accrued expenses payable (operating expenses) 20,230 21,610 Income tax payable 3,990 3,990 Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required.

Answer 1

Ans.	Particulars	Amount	Amount
	Cash flows from operating activities:
	Cash collection from customer		$435,400
	Less: Cash payments:
	Cash paid for suppliers	$162,390
	Cash paid for operating expenses	$115,630
	Cash paid for income taxes	$40,330	$318,350
	Net cash generated from operating activities		$117,050
	*WORKING NOTES :
	*Calculation of Cash received from customers:
	Total revenue	$440,800
	Add :- Opening accounts receivable	$30,940
	Less :- Closing accounts receivable	($36,340)
	Cash collection from customer	$435,400
	*Calculations of Cash payment to suppliers :
	Cost of goods sold	$154,500
	Add :- Closing Merchandise inventory	$92,890
	Less :- Opening Merchandise inventory	($80,000)
	Purchase	$167,390
	Add :- Opening accounts payable	$62,180
	Less :- Closing accounts payable	($67,180)
	Cash payment to suppliers	$162,390
	*Calculation of Cash paid for Operating expenses other than depreciation:
	Other Operating expenses	$115,110
	Add: Beginning Accrued expenses payable	$21,610
	Less: Ending accrued expenses payable	-$20,230
		$116,490
	Add: Ending prepaid expenses	$15,580
	Less: Beginning prepaid expenses	-$16,440
	Cash payment for other operating expenses	$115,630
	*Depreciation is a non cash expenses so it is not included in the calculation of cash flow from
	operating activities under direct method.
	*Income tax payable in the beginning and end of the year are same, thus no adjustment would
	be made for this.