Novak Corp. uses the direct method to prepare its statement of cash flows. Novak
ID: 2396813 • Letter: N
Question
Novak Corp. uses the direct method to prepare its statement of cash flows. Novak trial balances at December 31, 2017 and 2016, are as follows.
December 31
2017
2016
$35,000
$32,400
33,200
29,800
31,000
47,200
100,400
95,400
4,600
5,100
248,100
376,800
141,100
173,700
136,600
152,000
4,300
2,700
20,500
61,000
$754,800
$976,100
$1,300
$1,100
16,600
15,100
25,200
15,600
20,900
29,100
5,200
4,500
44,800
20,000
49,500
40,000
9,100
7,500
44,600
65,200
537,600
778,000
$754,800
$976,100
Additional information:
Determine what amounts Novak should report in its statement of cash flows for the year ended December 31, 2017, for the following items.
I need help solving for Cash Paid for Income Taxes and Cash paid for selling expenses........
December 31
Debits2017
2016
Cash$35,000
$32,400
Accounts receivable33,200
29,800
Inventory31,000
47,200
Property, plant, & equipment100,400
95,400
Unamortized bond discount4,600
5,100
Cost of goods sold248,100
376,800
Selling expenses141,100
173,700
General and administrative expenses136,600
152,000
Interest expense4,300
2,700
Income tax expense20,500
61,000
$754,800
$976,100
Credits Allowance for doubtful accounts$1,300
$1,100
Accumulated depreciation—plant assets16,600
15,100
Accounts payable25,200
15,600
Income taxes payable20,900
29,100
Deferred tax liability5,200
4,500
8% callable bonds payable44,800
20,000
Common stock49,500
40,000
Paid-in capital in excess of par9,100
7,500
Retained earnings44,600
65,200
Sales revenue537,600
778,000
$754,800
$976,100
Explanation / Answer
Cash Paid for Income Taxes
Opening provision of Income tax
$ 29,100.00
Current year's Income tax
$ 20,500.00
Less: Closing provision of Income tax
$ 20,900.00
Cash paid for Income taxes
$ 28,700.00
Cash paid for selling Expenses
Total selling expenses
$ 141,100.00
Less: 1/3 Depreciation (non cash expense)
$ 500.00
Cash paid for selling Expenses
$ 140,600.00
Selling expenses Includes 1/3 of Depreciation. Since Depreciation is a non cash expenses it has to be deducted from total selling expense to get cash selling expense.
Calculation of Depreciation
Closing balance of Accumulated depreciation
$ 16,600.00
Less: Opening balance of Accumulated depreciation
$ 15,100.00
Depreciation for the Year (balancing Figure)
$ 1,500.00
Cash Paid for Income Taxes
Opening provision of Income tax
$ 29,100.00
Current year's Income tax
$ 20,500.00
Less: Closing provision of Income tax
$ 20,900.00
Cash paid for Income taxes
$ 28,700.00
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