Determination of Missing Amounts—Cash Flow from Operating Activities Required: T
ID: 2494041 • Letter: D
Question
Determination of Missing Amounts—Cash Flow from Operating Activities
Required:
The computation of cash provided by operating activities requires analysis of the noncash current asset and current liability accounts. Using T accounts, determine the missing amounts for each of the following independent cases:
Determination of Missing Amounts—Cash Flow from Operating Activities
Required:
The computation of cash provided by operating activities requires analysis of the noncash current asset and current liability accounts. Using T accounts, determine the missing amounts for each of the following independent cases:
Case 1 Accounts receivable, beginning of year $174,000 Accounts receivable, end of year 113,000 Credit sales for the year 191,000 Cash sales for the year 75,000 Write-offs of uncollectible accounts 31,000 Total cash collections for the year (from cash sales and collections on account) $ Case 2 Inventory, beginning of year $26,000 Inventory, end of year 50,000 Accounts payable, beginning of year 22,000 Accounts payable, end of year 13,000 Cost of goods sold 135,000 Cash payments for inventory (assume all purchases of inventory are on account) $ Case 3 Prepaid insurance, beginning of year $21,000 Prepaid insurance, end of year 23,000 Insurance expense 17,000 Cash paid for new insurance policies $ Case 4 Income taxes payable, beginning of year $91,000 Income taxes payable, end of year 99,000 Income tax expense 64,000 Cash payments for taxes $Explanation / Answer
Case 1
In the accounts receivable leder, we will calculate cash collections as follows:
Cash collections from receivables
=Opening balance + Credit sales for the year - Write-offs of uncollectible accounts - Accounts receivable, end of year
= $ (174,000+191,000-31,000-113,000)
= $ 221,000
Total cash collections for the year (from cash sales and collections on account)
= Cash collections from receivables + Cash Sales for the year
= $ 221,000 + $ 75,000
= $ 296,000
Case 2
Cost of Goods sold
= Opening stock + Purchases - Closing stock
So, $ 135,000 = $ (26,000 + Purchases - 50,000)
So, Purchases = $ 159,000
So, Cash payments for inventory
= Opening balance due + Purchases - Closing balance due
= $ (22,000+159,000-13,000)
= $ 168,000
Case 3
Addition to prepaid Insurance (Insurance paid in advance and not shown as expense)
= $ 23,000 - $ 21,000
= $ 2,000
So, Cash paid for new insurance policies
= Insurance booked as expense + Insurance paid in advance
= $ 17,000 + $ 2,000
= $ 19,000
Case 4
Income taxes not paid and carried forward as liability (shown as expense but not paid)
= $ 99,000 - $ 91,000
= $ 8,000
So, Cash payments for taxes
= Income tax expense - Unpaid taxes
$ 64,000 - $ 8,000
= $ 56,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.