Explanation Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company. Direct method: This method uses the basis of cash for preparing the cash flows of statement. Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid. The cash receipts and cash payments of Incorporation L for 2018 are determined as follows: a. Determine the collection from customers: Collection from customers = Net sales + Decrease in accounts receivable = $24,623 + $7 (1) = $ 24,630 Working notes: Calculate increase or decrease in accounts receivable. Increase or decrease in accounts receivable } = ( Beginning balance of accounts receivable − Ending balance of accounts receivable ) = ( $ 606 − $ 599 ) = $ 7 ( Decrease ) (1) Hence, the cash collected from customers is $24,630 . b. Calculate the payments for inventory: Paymnet for inventories = ( Cost of goods sold + Increase in Inventories (2) − Increase in Accounts Payable (3) ) = $ 18 , 176 + $ 269 − $ 181 = $ 18 , 264 Working notes: Calculate increase or decrease in inventories: Increase or decrease in inventories } = ( Beginning balance of inventories − Ending balance of inventories ) = ( $ 3 , 110 − $ 2 , 841 ) = $ 269 ( Increase ) (2) Calculate increase or decrease in accounts payable: Increase or decrease in accounts payable } = ( Beginning balance of accounts payable − Ending balance of accounts payable ) = ( $ 1 , 544 − $ 1 , 363 ) = $ 181 ( Increase ) (3) Hence, the cash payment for inventories is $18,264 . c

Financial Accounting (12th Edition) (What's New in Accounting)

12th Edition

ISBN: 9780134725987

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Chapter 11, Problem 11.75CEP

To determine

The cash receipts and cash payments of Incorporation L for 2018.

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Chapter 11, Problem 11.74BP

Chapter 11, Problem 11.76CEP

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Chapter 11 Solutions

Financial Accounting (12th Edition) (What's New in Accounting)

Ch. 11 - Quick Check (Answers are given here) The statement...Ch. 11 - Prob. 2QC Ch. 11 - Prob. 3QC Ch. 11 - Which of the three types of activities reported on...Ch. 11 - Prob. 5QC Ch. 11 - On the statement of cash flows, which of the...Ch. 11 - On the statement of cash flows, which of the...Ch. 11 - Prob. 8QC Ch. 11 - Prob. 9QC Ch. 11 - Which of the following transactions does not...

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