Account Title 2012 2011 Accounts receivable $46,000 $42,000 Interest receivable
ID: 2436104 • Letter: A
Question
Account Title 2012 2011Accounts receivable $46,000 $42,000
Interest receivable 5,000 6,000
Other operating expenses payable 27,000 22,000
Salaries payable 12,000 15,000
The 2012 income statement is shown below:
Income Statement
Sales $680,000
Salary expense (172,000)
Other operating expenses (270,000)
Operating income 238,000
Nonoperating items: Interest revenue 24,000
Net income $262,000
I am stuck in this question : Use the direct method to compute the amount of cash outflows from operating activities. What is the payment of other operating expenses and the payment of salaries expenses ?
Explanation / Answer
The Operating activities of the cash flow statement using Direct method will be reported as: Net cash provided by Operating activities will be calculated as Cash receipts - Cash payments = Net cash provided by Operating activities Cash receipts = Revenues from sales - Increase in Accounts receivables = $680,000 - $4,000 = $676,000 Cash receipts from interest = Interest Revenue + Interest recevable in 2011 - Interest receivable in 2012 = $24,000 + $6,000 - $5,000 = $25,000 Cash payments from Salaries expense = Salary expense + Salary expense in 2011 - Salary expense in 2012 = $172,000 + $15,000 - $12,000 = $175,000 CAsh payments from Operating expense = Operating expense + OPerating expense in 2011 - Operating expense in 2012 = $270,000 + $22,000 - $27,000 = $265,000 Total cash receipts - Total cash payments = $701,000 - $440,000 = $261,000 Therefore, the Net cash provided by Operating activities is $261,000.
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