Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

The income statement of Guesser Company is shown below. GUESSER COMPANY INCOME S

ID: 2419052 • Letter: T

Question

The income statement of Guesser Company is shown below.

GUESSER COMPANY

                                                            INCOME STATEMENT

                                                FOR THE YEAR ENDED DECEMBER 31, 2014

                        Sales                                                        $755,000

                        Cost of goods sold                                     543,000

                        Gross profit                                                212,000

                        Operating expenses

                        Selling expenses            $52,000

                        Administrative expenses 89,000               141,000

                        Net income                                               $ 71,000

Additional information:

1. Accounts receivable decreased $63,000 during the year.

2. Inventory increased $38,000 during the year.

3. Prepaid expenses increased $12,000 during the year.

4. Accounts payable to increased $25,000 during the year.

5. Accrued expenses payable increased $6,000 during the year.

6. Administrative expenses include depreciation expense of $20,000.

7. Periodic inventory method was used.

Instructions

Prepare the operating activities section of the statement of cash flows using the direct method for December 31, 2014.

Explanation / Answer

Cash flows from Operating activities: Cash received frm customer (755000+63000) 818000 Cash paid for purchases (543000+38000-25000) -556000 cash paid for Selling expense (52000+12000-6000) -58000 Admin expense paid (89000-20000) -69000 Net provided from operating activities 135000