Q12SE - Horngren'S Financial And Managerial Accounting

Question

 Preparing operating activities using the direct method Amy’s Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000 

Payments to employees 66,000 

Payment of notes payable 34,000 

Payment of dividends 7,500 

Cash receipt from issuance of stock 22,000 

Collections from customers 188,000

Cash receipt from sale of land 58,000 

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business’s statement of cash flows for the year ended June 30, 2018, using the direct method.

Step-by-Step Solution

Answer

Net cash provided by operating activities is $7,000.

Step-by-Step Solution Step 1: Cash flow from operating activities

Cash flows from operating activities
Receipts:
Collection from customers	$188,000
Payments:
To suppliers	($115,000)
To employees	($66,000)
Net cash provided by operating activities		$7,000

Step 2: Classification of investing and financing activity

Transaction	Activity
Cash payment for purchase of equipment	Investing
Payment of notes payable	Financing
Payment of dividends	Financing
Cash receipt from issuance of stock	Financing
Cash receipt from sale of land	Investing