The income statement for Rhino Company for the current year ended June 30 is as
ID: 2497481 • Letter: T
Question
The income statement for Rhino Company for the current year ended June 30 is as follows:
1
Sales
$445,500.00
2
Cost of merchandise sold
154,000.00
3
Gross profit
$291,500.00
4
Operating expenses:
5
Depreciation expense
$38,500.00
6
Other operating expenses
115,280.00
7
Total operating expenses
153,780.00
8
Income before income tax
$137,720.00
9
Income tax expense
39,600.00
10
Net income
$98,120.00
The balances of selected accounts at the beginning and the end of the current year are as follows:
Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct”, “Add” or colons (:) will automatically appear if required.
1
Sales
$445,500.00
2
Cost of merchandise sold
154,000.00
3
Gross profit
$291,500.00
4
Operating expenses:
5
Depreciation expense
$38,500.00
6
Other operating expenses
115,280.00
7
Total operating expenses
153,780.00
8
Income before income tax
$137,720.00
9
Income tax expense
39,600.00
10
Net income
$98,120.00
Explanation / Answer
Cash flow from operating activities Direct method Sales 445,500 less: increase in account receivable (5,060) Cash collections 440,440 LESS: Cost of goods sold 154,000 Add: increase in inventories 12,100 less: increase in account payable (4,840) Cash payment for purchases 161,260 Sales and Administration Operating expenses 115,280 Less: decrease in prepaid expense (1,320) Less: decrease in accrued expense payable (1,760) cash payment for operations 112,200 Income tax expense 39,600 increase in income tax payable - cash payment for income taxes 39,600 Net cashflow from operating activities 127,380
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