Question

Problem 12-04A The income statement of Kingbird, Inc. is presented here. Kingbird, Inc. Income Statement For the Year Ended November 30, 2020 Sales revenue $7,465,900 Cost of goods sold Beginning inventory $1,868,500 Purchases 4,450,600 Goods available for sale 6,319,100 Ending inventory 1,331,800 Total cost of goods sold 4,987,300 Gross profit 2,478,600 Operating expenses 1,120,500 Net income $1,358,100 Additional information: 1. Accounts receivable increased $205,900 during the year, and inventory decreased $536,700. 2. Prepaid expenses increased $179,800 during the year. 3. Accounts payable to suppliers of merchandise decreased $345,700 during the year. 4. Accrued expenses payable decreased $105,800 during the year. 5. Operating expenses include depreciation expense of $95,300. Prepare the operating activities section of the statement of cash flows using the direct method

Answer 1

Answer:

Cash Flow From Operating Activities

Cash Receipt from Customers                       $7,260,000

Cash Paid to Suppliers and Employees       ($6,294,700)

Cash Provided by Operating Activities            $965,300

Explanation:

Step 1 : Cash Paid to Suppliers and Employees Calculation

Cost of goods sold                                         $4,987,300

Add Operating expenses                                $1,120,500

Total                                                                 $6,107,800

Adjustments :

Depreciation expense                                        $95,300

Decrease in Inventory                                     ($536,700)

Increase in Prepaid Expenses                          $179,800

Decrease in Accounts Payable                        $345,700

Decrease in Accrued Expense Payable          $105,800

Cash Paid to Suppliers and Employees       $6,294,700

Step 2 : Cash Receipt from Customers Calculation

Sales revenue                                                $7,465,900

Less Increase in Accounts receivable          ($205,900)

Cash Receipt from Customers                      $7,260,000