Annie Lennox Co. reports revenues of $206,830 and operating expenses of $109,850

Question

Annie Lennox Co. reports revenues of $206,830 and operating expenses of $109,850 in its first year of operations, 2014. Accounts receivable and accounts payable at year-end were $79,990 and $37,750, respectively. Assume that the accounts payable related to operating expenses. Ignore income taxes.

Using the direct method, compute net cash provided (used) by operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Please show your work!

Explanation / Answer

Cash flow Direct Method:

Cash flow from operating activities                         

Cash receipts from customers ($206,830-$79,990)                             $126,840

Cash paid to suppliers ($109,850-$37,750)                                         -$72,100

                                                                                                             -------------------

Net   Cash flow from operating activities                                               $54,740

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