Los Lobos Corp. uses the direct method to prepare its statement of cash flows. R
ID: 2470729 • Letter: L
Question
Los Lobos Corp. uses the direct method to prepare its statement of cash flows. Relevant balances for Los Lobos at December 31, 2014 and 2013, are as follows. December 31 Debits 2014 2013 Cash $35,180 $32,240 Accounts receivable 32,640 30,310 Inventory 31,450 47,330 Property, plant, & equipment 100,080 92,100 Unamortized bond discount 4,370 5,260 Cost of goods sold 252,700 379,960 Selling expenses 141,160 171,960 General and administrative expenses 137,340 151,520 Interest expense 4,760 2,650 Income tax expense 20,770 61,660 $760,450 $974,990 Credits Allowance for doubtful accounts $1,740 $1,400 Accumulated depreciation—plant assets 16,996 13,870 Accounts payable 25,440 17,370 Income taxes payable 19,730 29,400 Deferred income taxes 5,050 4,140 8% callable bonds payable 44,500 21,430 Common stock 59,050 41,700 Paid-in capital in excess of par 8,630 7,030 Retained earnings 44,800 64,620 Sales revenue 534,514 774,030 $760,450 $974,990 Additional information: 1. Los Lobos purchased $7,980 in equipment during 2014. 2. Los Lobos allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. 3. Bad debt expense for 2014 was $4,620, and write-offs of uncollectible accounts totaled $4,280. Determine what amounts Los Lobos should report in its statement of cash flows for the year ended December 31, 2014, for the following items.
(a) Cash collected from customers.
(b) Cash paid to suppliers.
(c) Cash paid for interest.
(d) Cash paid for income taxes.
(e) Cash paid for selling expenses
Explanation / Answer
(a)
Calculation of Cash collected from customers:
+
Sales Revenue
$534,515
+
Beginning Accounts Receivable
$ 30,310
Ending Accounts Receivable
$ (32,640)
Cash collected from customers
$532,185
(b)
Calculation of Cash Paid to Suppliers:
+
Cost of Goods sold
$252,700
+
Ending Inventory
$ 31,450
Beginning Inventory
$ (47,330)
+
Beginning Accounts Payable
$ 17,370
Ending Accounts Payable
$ (25,440)
Cash Paid to Suppliers
$228,750
(c)
Cash paid for interest.
$ 4,760
(d)
Calculation of Cash paid for income taxes:
+
Beginning Income Tax Payable
$ 29,400
Ending Income Tax Payable
$ (19,730)
+
Income Tax Expense
$ 20,770
Cash paid for income taxes
$ 30,440
(e)
Cash paid for selling expenses
$141,160
(a)
Calculation of Cash collected from customers:
+
Sales Revenue
$534,515
+
Beginning Accounts Receivable
$ 30,310
Ending Accounts Receivable
$ (32,640)
Cash collected from customers
$532,185
(b)
Calculation of Cash Paid to Suppliers:
+
Cost of Goods sold
$252,700
+
Ending Inventory
$ 31,450
Beginning Inventory
$ (47,330)
+
Beginning Accounts Payable
$ 17,370
Ending Accounts Payable
$ (25,440)
Cash Paid to Suppliers
$228,750
(c)
Cash paid for interest.
$ 4,760
(d)
Calculation of Cash paid for income taxes:
+
Beginning Income Tax Payable
$ 29,400
Ending Income Tax Payable
$ (19,730)
+
Income Tax Expense
$ 20,770
Cash paid for income taxes
$ 30,440
(e)
Cash paid for selling expenses
$141,160
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