Blue Corporation had the following 2017 income statement. Revenues $102,000 Expenses 65,000 $37,000 In 2017, Blue had the follow
ing activity in selected accounts. Accounts Receivable 1/1/17 22,000 Revenues 102,000 12/31/17 25,000 Write-offs 1,000 Collections 98,000 Allowance for Doubtful Accounts Write-offs 1,000 1/1/17 1,300 Bad debt expense 2,000 12/31/17 2,300 (a) Prepare Blue’s cash flows from operating activities section of the statement of cash flows using the direct method.
1 answer:
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Answer:
$67,800
Explanation:
We can use annuity formula to find the present value of the royalties received for the upcoming ten years.
The annuity formula used here is attached with the answer.
The first step would be finding annuity factor at 12%.
So
Annuity Factor = (1-(1+r)^-n) / r
By putting values, we have:
Annuity Factor = (1 - (0.322)) / 0.12 = 5.65
Present Value = Annual Cash flow * Annuity Factor
PV = $12,000 * 5.65 = $67,800
