Answer:
Rolling Hills Corporation
Statement of Cash Flows for the year ended June 30, 2018, using the direct method:
Cash flows from operating activities:
Cash collections from customers $ 245,000
Cash paid to suppliers (123,000)
Cash to employees: ($45,000)
Income tax ($7,000)
Net Cash from operating activities $70,000
Net Cash Provided by (Used for) Operating Activities $70,000
Cash flows from investing activities:
Cash for plant acquisition ($104,000)
Cash from sale of land $21,000
Cash from Dividend revenue $7,500
Net Cash flows from investing (75,500) (75,500)
Cash flows from financing activities:
Cash from issuance of common stock $34,000
Payment for long-term notes payable (20,000)
Dividends payment (9,500)
Interest (5,000)
Net Cash flows from financing activities (500) (500)
Net cash outflows (6,000)
Explanation:
a) Data and Calculations:
Rolling Hills Corporation Income Statement Year Ended June 30, 2018
Net Sales Revenue $ 228,000
Cost of Goods Sold 109,000
Gross Profit 119,000
Operating Expenses:
Salaries Expense $ 44,000
Depreciation Expense
-Plant Assets 22,000
Advertising Expense 14,000
Total Operating Expenses 80,000
Operating Income 39,000
Other Income and (Expenses)
Dividend Revenue 7,500
Interest Expense (5,000)
Total Other Income
and (Expenses) 2,500
Net Income Before Taxes 41,500
Income Tax Expense 7,000
Net Income $ 34,500
b) Cash collections from customers:
Net Sales Revenue $ 228,000
More than 17,000
Total cash collections $ 245,000
c) Cash from Dividend revenue = $7,500
d) Cash Payment:
Interest = $5,000
Income tax = $7,000
Suppliers: $123,000
e) Payment to suppliers:
Cost of goods sold 109,000
Advertising 14,000
Cash payments $123,000
f) Payment to employees:
Cash to employees: = $45,000 ($44,000 + 1,000)
g) Cash for plant acquisition = $104,000
h) Cash from sale of land = $21,000
i) Cash from issuance of common stock = $34,000
j) Payment for long-term notes payable = $20,000
k) Dividends payment = $9,500
l) Rolling Hills Corporation can use the direct method for preparing its Statement of Cash Flows for the year ended June 30, 2018. It is one of the two methods in use. The other is the indirect method. The direct method uses only the actual cash receipts and payments to prepare the statement, under the three classifications of cash flows into operating, investing, and financing activities sections.
