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17 July, 06:11

The following information pertains to Peak Heights Company: Income Statement for Current Year Sales $ 93,000 Expenses Cost of goods sold $ 51,875 Depreciation expense 6,000 Salaries expense 12,000 69,875 Net income $ 23,125 Partial Balance Sheet Current year Prior year Accounts receivable $ 10,500 $ 12,000 Inventory 13,000 8,000 Salaries payable 2,250 800 Required: Present the operating activities section of the statement of cash flows for Peak Heights Company using the direct method. (List cash outflows as negative amounts.)

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  1. 17 July, 06:26
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    Peak Heights Company

    Cashflow Statement (Extract)

    Cashflow from Operating Activities

    Cash Receipts from Customers $94500

    Cash paid to Suppliers and Employees ($25450)

    Cash Generated from Operations $0

    Net Cashflow from Operating Activities $69050

    Explanation:

    Cash Receipts from Customers

    Open a Trade and Other Receivables - T Account and the balancing figure is the cash receipts from customers

    Opening Accounts Receivables $ 12000 (debit)

    Sales for the Year $ 93000

    Closing Accounts Receivables$10500 (credit)

    Bank (Balancing Figure) $ 94500 (credit)

    Therefore Cash Receipts from Customers is $94500

    Cash paid to Suppliers and Employees

    Sales $ 93,000

    Less Cost of goods sold $ 51,875

    Gross Profit $ 41,125

    Less Net income $ 23,125

    Expenses $18,000

    Calculation for Cash Expenses (Suppliers and Employees)

    Expenses $18,000

    Add Depreciation expense $6,000

    Add Increase in Accounts payable (2250-800) $1,450

    Cash paid to Suppliers and Employees $25450
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