1. Exercise 23-5 Blossom Company\'s income statement for the year ended December
ID: 2530880 • Letter: 1
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1.
Exercise 23-5 Blossom Company's income statement for the year ended December 31, 2017, contained the following condensed information. Service revenue Operating expenses (excluding $847,000 $629,000 Depreciation expense Loss on sale of equipment Income before income taxes Income tax expense Net income 60,000 26,000 715,000 132,000 41,000 $91,000 Blossom's balance sheet contained the following comparative data at December 31 2017 2016 Accounts receivable Accounts payable Income taxes payable $35,000 42,000 4,100 $53,000 30,000 8,800 (Accounts payable pertains to operating expenses.) Prepare the operating activities section of the statement of cash flows using the direct method Statement of Cash Flows (Partial)Explanation / Answer
Ans.1 BLOSSOM COMPANY Statement of Cash Flows (Partial) Cash recived from customers 865000 Less: Cash paid to suppliers and employees -617000 Cash generated from operations 248000 Less: Income tax paid -45700 Net Cash Flow from Operating Activities 202300 Working Notes: Calculation of Cash recived from customers: Service revenue 847000 Add: Beginning accounts receivables 53000 Less: Ending accounts receivables -35000 Cash recived from customers 865000 Calculation of Cash paid to suppliers and employees: Operating expenses 629000 Add: beginning accounts payables 30000 Less: Ending accounts payables -42000 Cash paid to suppliers and employees 617000 Calculations of Income tax paid: Income tax expenses 41000 Add: Beginning income tax payables 8800 Less: Ending income tax payables -4100 Income tax paid 45700 Ans.2 CRANE COMPANY Statement of Cash Flows (Partial) Net Income 93000 Add: Depreciation expenses 61000 Add: Loss on sale of equipment 26000 87000 Net Income before working capital changes 180000 Adjustment to reconcile net income to: Decrease in accounts receivables (52000-37000) 15000 Increase in accounts payables (39000-32000) 7000 Decrease in income tax payables (4000-8400) -4400 17600 Net Cash Flow from Operating Activities 197600 *Income tax payable is treated as current liabilities *Increase in Current liabilities & Decrease in current assets are added to net income. *Decrease in Current liabilities & Increase in current assets are subtracted to net income.
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