Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 12, Problem 2PSA
To determine

Cash Flow Statement:

Cash flow statement is that statement in which, transaction related to cash are recorded. It is mandatory report and included in the financial statement of the company. It is divided into three parts operating activities, investing activity, and financial activity

Operating Activity:

Operating activity is the first part of the cash flow statement. The main focuses of the operating activity on the cash inflow and outflow from the selling goods, providing services and manufacturing. Long term capital and investing cost are not included in the operating activity.

To prepare: Cash flow from operating activities by direct method.

Expert Solution & Answer
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Explanation of Solution

Prepare section related to operating activities of statement of cash flows:

L Company

Statement of Cash Flows

For the Year Ended 31 December, 2017

Cash flow from operating activities (direct method)

Amount

($)

Cash receipts form customer

97,400

Cash paid for rent

(9,040)

Cash paid for salaries

(17,820)

Cash paid for insurance

(3,780)

Cash paid for interest

(3,600)

Cash paid for utilities

(2,740)

Cash paid for inventory

(42,640 )

Net cash flow from operating activities

17,780

Hence, $17,800 is the net cash flow from operating activities.

Working Note:

Computation of cash received from customer,

    Cashreceiptfromcustomers=( Salesrevenue+Accountreceivable2016 Accountrecevable2017 ) =$97,200+$5,800$5,600 =97,400

Cash receipt from customer is $97,400.

Computation of the cash paid for rent,

    Cashpaidforrent=Rentexpense+Prepaidrent2017Prepaidrent2016 =$9,000+$220$180 =$9,040

Cash paid for rent is $9,040.

Computation of the salaries payable,

    Cashpaidforsalaries=( Salariesexpense+Salariespayable2016  Salariespayable2017 ) =$18,000+$700$880 =$17,820

Cash paid for the salaries is $17,820.

Computation of cash paid for insurance,

    Cashpaidforinsurance=( Insuranceexpense+Prepaidinsurance2017 Prepaidinsurance2016 ) =$3,800+$260$280 =$3,780

Cash paid for insurance is $3,780.

Computation of cash paid for utilities,

    Cashpaidforutilities=( Utilitiesexpense+Utilitiespayable2016 Utilitiespayable2017 ) =$2,800+$160$220 =$2,740

Cash paid for utilities is $2,740.

Computation of cash paid to acquire inventory,

    Cashpaidtoacquireinventory=Costofgoodssold +( ClosinginventoryOpeningeinventory ) +( Accountpayable2016  Accountpayable2017 ) =$42,000+( $1,980$1,540 )+( $4,600$4,400 ) =$42,640

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Chapter 12 Solutions

Managerial Accounting

Ch. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 10DQCh. 12 - Prob. 11DQCh. 12 - Prob. 12DQCh. 12 - Prob. 13DQCh. 12 - Prob. 14DQCh. 12 - Prob. 15DQCh. 12 - Prob. 1QSCh. 12 - Prob. 2QSCh. 12 - Prob. 3QSCh. 12 - Prob. 4QSCh. 12 - Prob. 5QSCh. 12 - Prob. 6QSCh. 12 - Prob. 7QSCh. 12 - Prob. 8QSCh. 12 - Prob. 9QSCh. 12 - Prob. 10QSCh. 12 - Prob. 11QSCh. 12 - Prob. 12QSCh. 12 - Prob. 13QSCh. 12 - Prob. 14QSCh. 12 - Prob. 15QSCh. 12 - Prob. 16QSCh. 12 - Prob. 17QSCh. 12 - Prob. 18QSCh. 12 - Prob. 19QSCh. 12 - Prob. 20QSCh. 12 - Prob. 21QSCh. 12 - Prob. 22QSCh. 12 - Prob. 23QSCh. 12 - Prob. 24QSCh. 12 - Prob. 25QSCh. 12 - Prob. 26QSCh. 12 - Prob. 27QSCh. 12 - Prob. 1ECh. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Prob. 9ECh. 12 - Exercise Reconstructed entries For each of the...Ch. 12 - Prob. 11ECh. 12 - Prob. 12ECh. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Direct: Preparing statement of cash flows Refer to...Ch. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 1PSACh. 12 - Prob. 2PSACh. 12 - Prob. 3PSACh. 12 - Prob. 4PSACh. 12 - Prob. 5PSACh. 12 - Prob. 6PSACh. 12 - Prob. 7PSACh. 12 - Prob. 8PSACh. 12 - Prob. 1PSBCh. 12 - Prob. 2PSBCh. 12 - Prob. 3PSBCh. 12 - Prob. 4PSBCh. 12 - Prob. 5PSBCh. 12 - Prob. 6PSBCh. 12 - Prob. 7PSBCh. 12 - Prob. 8PSBCh. 12 - Prob. 12SPCh. 12 - Prob. 1GLPCh. 12 - Prob. 2GLPCh. 12 - Prob. 3GLPCh. 12 - Prob. 1AACh. 12 - Prob. 2AACh. 12 - Prob. 3AACh. 12 - Prob. 1BTNCh. 12 - Prob. 2BTNCh. 12 - Prob. 3BTNCh. 12 - Prob. 4BTNCh. 12 - Prob. 5BTNCh. 12 - Prob. 6BTNCh. 12 - Prob. 7BTN
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