14SE - Horngren'S Financial And Managerial Accounting

Question

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

 

Requirements 

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.

 2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.

Step-by-Step Solution

Answer

Requirement 1. Collections from customers during 2018 is $123,000

Requirement 2. Payments for inventory during 2018 is $63,000.

Computation of collections from customers during 2018 for Red Toy Company

Particulars	Amount($)	Particulars	Amount($)
Account Receivables (31st December,2017)	42,000	Account Receivables (31st December,2018)	53,000
Sales revenue	134,000	Cash collected (Balancing figure)	123,000
Total	176,000	Total	176,000

Computation of payments for inventory during 2018

Cash paid for inventory = Cost of goods sold – Beginning merchandise inventory + Ending merchandise inventory + Beginning Accounts Payable - Ending Accounts Payable

Cash paid for inventory =$79,000 –$88,000 + $76,000 + $38,000 - $42,000

      =$63,000