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
