Part 2. The Direct Method Bragg Mechanical Inc. shows the following information
ID: 2490788 • Letter: P
Question
Part 2. The Direct Method
Bragg Mechanical Inc. shows the following information at the end of the year:
Sales
$ 690,000
Cost of good sold
410,000
Salaries expense
90,000
Insurance expense
20,000
Income tax expense
22,000
Increase in accounts receivable
9,000
Decrease in inventory
8,000
Increase in accounts payable
14,000
Increase in salaries payable
13,000
Decrease in taxes payable
2,000
Calculate the cash flows from operating activities using the direct method and prepare the operating section of the statement of cash flows for Bragg Mechanical. Enter your answers in the shaded boxes below. A couple of boxes have been completed for you.
Cash flows from operating activities
Cash receipts from customers
This formula is located in the beige box on page284
Less cash payments:
To suppliers
Insurance
Salaries/Utilities
Taxes
Net cash provided by operating activities
Sales
$ 690,000
Cost of good sold
410,000
Salaries expense
90,000
Insurance expense
20,000
Income tax expense
22,000
Increase in accounts receivable
9,000
Decrease in inventory
8,000
Increase in accounts payable
14,000
Increase in salaries payable
13,000
Decrease in taxes payable
2,000
Explanation / Answer
Cash flows from operating activities:
Purchases = COGS - Decrease in inventory = 410000 - 8000 = $402000
Calculation $ Cash received from customers Sales - Increase in accounts receivable = 690000 - 9000 681000 Less: Cash payments To suppliers Purchases - Increase in accounts payable = 402000 - 14000 388000 Insurance 20000 Salaries/Utilities Salary expense - Increase in salary payable = 90000 - 13000 77000 Taxes Income tax expense + Decrease in taxes payable = 22000 + 2000 24000 Net cash provided by operating activities 172000Related Questions
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