Service Revenue for the year = $80,000. Of this amount, $70,000 is collected during the year and $10,000 is expected to be collected next year. Salaries Expense for the year = $40,000. Of this amount, $35,000 is paid during the year and $5,000 is expected to be paid next year. Advertising Expense for the year = $10,000. All of this amount is paid during the year. Supplies Expense for the year = $4,000. No supplies were purchased during the year. Utilities Expense for the year = $12,000. Of this amount, $11,000 is paid during the year and $1,000 is expected to be paid next year. Cash collected in advance from customers for services to be provided next year (Deferred Revenue) = $2,000. Required: Calculate operating cash flows. (List cash outflows as negative amounts.)

Question

Guest

Business

30 November, 01:01

Service Revenue for the year = $80,000. Of this amount, $70,000 is collected during the year and $10,000 is expected to be collected next year. Salaries Expense for the year = $40,000. Of this amount, $35,000 is paid during the year and $5,000 is expected to be paid next year. Advertising Expense for the year = $10,000. All of this amount is paid during the year. Supplies Expense for the year = $4,000. No supplies were purchased during the year. Utilities Expense for the year = $12,000. Of this amount, $11,000 is paid during the year and $1,000 is expected to be paid next year. Cash collected in advance from customers for services to be provided next year (Deferred Revenue) = $2,000. Required: Calculate operating cash flows. (List cash outflows as negative amounts.)

+5

Answers (1)

Know the Answer?

Finley Vance · Answer 1

Net Cash Inflow from Operating Activities = $16,000

Explanation:

In the given information, it is not provided that cash is paid or not for Supplies, thus, assumed it was paid at the time of acquisition, and not in the current period when it is only charge to expense.

In that case, Cash generated from operating activities using direct method, shall be:

Cash flow from Operating Activities

Cash revenue collected = $70,000

Cash collected in advance = $2,000

Total cash inflow = $72,000

Cash paid for salaries = - $35,000

Cash paid for advertising expense = - $10,000

Cash paid for utilities = - $11,000

Total Cash outflow = - $56,000

Net Cash Inflow from Operating Activities = $16,000