Question

The income statement of Whitlock Company is presented here. W Income Statement NY For the Year Ended November 30, 2020 Sales revenue $7,459,100 Cost goods sold Beginning inventory $1,986,400 Purchases 4,371,200 Goods available for sale 6,357,600 Ending inventory 1,444,200 Total cost of goods sold 4,913,400 Gross profit 2,545,700 Operating expenses 1,122,500 $1,423,200 Net income Additional information: 1. Accounts receivable increased $198,900 during the year, and inventory decreased $542,200. 2. Prepaid expenses increased $180,000 during the year. 3. Accounts payable to suppliers of merchandise decreased $334,000 during the year 4. Accrued expenses payable decreased $108,500 during the year. 5. Operating expenses include depreciation expense of $98,000. Prepare the operating activities section of the statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a e.g. (15,000).) sign e.g. -15,000 parenthesis WHITLOCK COMPANY Partial Statement of Cash Flows cash payments: 4 t

Answer 1

Solution :- Cash flow statement (Operating activities section)

Particulars	Amount ($)
Net income (+) Depreciation (being non-cash and non-operating expense)	1423200 98000
Operating profit before working capital changes (+) decrease in inventory (-) increase in accounts receivables (-) increase in prepaid expenses. (-) decrease in accounts payable (-) decrease in accrued expenses payable	1521200 542200 198900 180000 334000 108500
Cash flow from operating activities	1242000

Conclusion :-

Cash flow from operating activities

$ 1242000

Notes :- (i). Decrease in current assets and Increase in current liabilities are added in the calculation of cash flow from operating activities of company / firm.

(ii). Increase in current assets and Decrease in current liabilities are subtracted in the calculation of cash flow from operating activities of company / firm.