Question

Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

Answer 1

Answer and Explanation:

The presentation of the cash flow statement using the direct method is presented below:

                                                  Cash flow statement

Particulars                                  Amount ($)      Total Amount($)

Cash flow from operating activities:-  

Cash received from customers    327,150  

Less-Cash paid to suppliers     (149,000)  

Less-Cash paid for operating expenses (89,000)  

Less-Cash paid for interest              (11,400)  

Less- Cash paid for income taxes (8,750)  

Net cash                                                                   $69,000

Cash flow from investing activities  

Sale of equipment {[$20,000-($20,000 × 70%)] + $2,000} 8,000  

Less-Equipment purchase [$154,000 - ($130,000 - $20,000)] (44,000)  

Less - Purchase of available –for-sale on investments   (17,000)  

($18,000-$35,000)

Net cash used by investing activities                              $53,000

Cash flow from financing activities:-  

Less - Principle payment on long term loan ($69,000-$60,000) (9,000)  

Less - Principle payment on short term loan ($10,000-$8,000) (2,000)  

Less - Paid Dividend (6,000)  

Net cash used by financing activities                                      ($17,000)

Net Cash decrease  (1,000)

Add : December 31,2016 Cash  7,000

December 31,2017 Cash  6,000

Working notes  

1. Particular  Amount ($)

Sales  338,150

Less - Account Receivable increase ($62,000-$51,000) (11,000)

Cash received by customers 327,150

2. Particular  Amount ($)

Cost of goods sold 175,000

Less-Decrease in inventory ($40,000-$60,000) (20,000)

Less-Increase in accounts payable ($46,000-$40,000) (6,000)

Cash paid to suppliers 149,000

3. Particular  Amount ($)

Operating expenses 120,000

Add-Increase in prepaid rent ($5,000-$4,000) 1,000

Less-Amortization of copyright ($46,000-$50,000) (4,000)

Less-Depreciation expenses [$35,000-{$25,000-($20,000*70/100)}] (24,000)

Less-Increase in salaries and wages payable($4,000-$8,000) (4,000)

Cash paid for operating expenses 89,000

4. Particular  Amount ($)

Income tax expense 6,750

Add-Income tax payable decrease($6,000-$4,000) 2,000

Total cash paid for income tax 8,750