Question

8A. Benton ​Island, Inc. began 2018 with cash of $ 70 comma 000. During the​ year, Benton Island earned revenue of $ 180 comma 000 and collected $ 80 comma 000 from customers. Expenses for the year totaled $ 159 comma 000​, of which Benton Island paid $ 85 comma 000 in cash to suppliers and $ 50 comma 000 in cash to employees. The company received $ 1 comma 800 cash for interest revenue and paid $ 11 comma 000 for income taxes. Benton Island also paid $ 30 comma 000 to purchase equipment and a cash dividend of $ 12 comma 000 to its stockholders during 2018. Prepare the​ company's operating activities section of the statement of cash flows for the year ended December​ 31, 2018. Use the direct method. ​(Use a minus sign or parentheses for amounts that result in a decrease in cash. If a box is not used in the​ statement, leave the box​ empty; do not select a label or enter a​ zero.)

Answer 1

Answer:

Benton Island, Inc.

Operating Activities Section of the Statement of Cash Flows for the year ended December 31, 2018 (using the direct method):

Cash from customers              $80,000

Cash to Suppliers                      -85,000

Cash to Employees                   -50,000

Income Taxes                              -11,000

Net Cash flow from Operating -66,000

Explanation:

1. The operating activities section shows inflows and outflows of cash resulting from a company's key operating activities.  Operating activities are different from the investing and financing activities of a firm.  The investing activities section shows the investments in assets and other entities made by the company, while the financing activities section shows how the company is funded and the repayments made to fund providers in principal and interest.

2.  The operating activities section can be prepared using two methods: the direct and the indirect methods.  The direct method starts by identifying the cash receipts and payments from operating activities.  The indirect method starts with the operating income and makes adjustments for non-cash flows, like Depreciation.