The income statement for M2 Pizza Pie Company for the current year ended June 30

Question

The income statement for M2 Pizza Pie Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows:

Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash out flows, cash payments, and decreases in cash.

Sales $192,920 Cost of merchandise sold 66,570 Gross profit $126,350 Operating expenses: Depreciation expense $16,660 Other operating expenses 50,030 Total operating expenses 66,690 Income before income tax $59,660 Income tax expense 17,260 Net income $42,400

Explanation / Answer

Answer:

Cash Received from customers= sales-increase in accounts receivable

=$192,920-2020=190900

cash payments for merchandise=Cost of merchandise sold+increase in merchandise-increase in accounts payable

=66,570+5190-2110=69650

cash payments for operating expenses=Other operating expenses-Dec in prepaid exp+Dec in accrued exp payable

=50,030-630+740=50140

cash payments for income taxes=Income tax expense+(-) change in income tax payable

=17,260

M2 Pizza Pie Company Cash Flows from Operating Activities Section For the year ended on June 30 Cash flows from operating activities: Cash received from customers 190900 Deduct cash payments for merchandise 69650 Deduct cash payments for operating expenses 50140 Deduct cash payments for income taxes 17,260 137050 Net cash flow from operating activities 53850

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