1. Pax Corp. uses the direct method to prepare its statement of cash flows. Pax\
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Question
1. Pax Corp. uses the direct method to prepare its statement of cash flows. Pax's trial balances at December 31, 2015 and 2014 are as follows:
December 31
2015 2014
Debits
Cash $ 40,200 $ 36,000
Accounts receivable 32,000 27,000
Inventory 29,680 45,000
Property, plant, & equipment 72,000 75,000
Unamortized bond discount 3,600 4,000
Cost of goods sold 220,000 345,000
Selling expenses 118,000 140,000
General and administrative expenses 100,100 130,000
Interest expense 4,135 2,500
Income tax expense 14,400 41,200
$634,115 $845,700
Credits
Allowance for uncollectible accounts 1,100 $ 1,000
Accumulated depreciation 10,500 12,000
Trade accounts payable 22,000 15,500
Income taxes payable 18,000 24,100
Deferred income taxes 6,000 4,000
8% callable bonds payable 35,000 18,000
Common stock 38,000 22,000
Additional paid-in capital 8,100 6,500
Retained earnings 57,915 52,000
Sales 437,500 690,600
$634,115 $845,700
Pax purchased $4,000 in equipment during 2015.
Pax allocated one third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. There were no write-offs of accounts receivable during 2015.
Required: For Pax’s December 31, 2015 Statement of Cash Flows, answer the following questions:
What is cash collected from customers for December 31, 2015?
What is cash paid for purchases of merchandise inventory goods to be sold?
What is cash paid for interest?
What is cash paid for income taxes?
What is cash paid for selling expenses?
Explanation / Answer
Account receivable Account Opening balance 27000 Sales 427500 Cash collected 422500 Closing balance 32000 454500 454500 Cash colloected from customer = $422500 Trade Accounts payable Opening balance 15500 Cash paid for purchase 211180 Purchases [Note] 204680 Closing balance 22000 226680 226680 Cash colloected from customer = $422500 Note on Purchase Cost of goods sold 220000 Less: opeing stock 45000 Add: Closing stock 29680 Purchases 204680 Cash Paid for Inteerst expense = $ 4135 Income tax account Opening balance 24100 Income tax paid 20500 Income tax made 14400 Closing balance 18000 38500 38500 Cash paid for income tax = $20500 Cash paid for selling expenses = 118000 + 1/3 of depreciation 121500
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