Fundamentals Of Financial Accounting
Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
Question
Book Icon
Chapter 12, Problem 5CP
To determine

Prepare the cash flows from operating activities section of the statement of cash flows of Company HH for the year ended December 31, using the direct method.

Expert Solution & Answer
Check Mark

Explanation of Solution

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities. Operating activities include cash inflows and outflows from business operations. Investing activities includes cash inflows and cash outflows from purchase and sale of land or equipment, or investments. Financing activities includes cash inflows and outflows from issuance of common stock and debt, payment of debt and dividends.

Operating activities: Operating activities include cash inflows and outflows from business operations.

Direct method: Under direct method, cash receipts from customers (cash inflows) and cash payments to suppliers (cash outflows) are reported under the operating activities.

Prepare the operating activities section of statement of cash flows of Company HH for the year ended December 31, under direct method.

Company HH
Statement of Cash Flows (Direct Method)
For the year ended
ParticularsAmount ($)
Cash flows from Operating activities: 
 Cash receipts from customers (1)$2,130
 Cash payments to suppliers (2)(932)
 Cash payments for salaries and wages  (3)(491)
 Cash payments for rent (4)(242)
 Cash payments for insurance (5)(89)
 Cash payments for utilities (6)(90)
 Cash payments for interest (60)
Net cash provided by operating activities$ 226

Table (1)

Working note (1):

Determine the cash received from customers:

Cash receipts from customers=[sales+(Opening accountsreceivables)(Closing accountsreceivables)]=$2,060+$450$380=$2,130

Working note (2):

Determine the cash paid to suppliers:

Cash paymentsto suppliers}=[Costofgoodssold+(Closing inventory Openinginventory)+(Opening accounts payableClosing accounts payable)]=$900+($82$60)+($210$200)=$932

Working note (3):

Calculate cash payments for salaries and wages expenses:

Cash paymentsfor salaries and wages}=[(Salaries and wages expenses)(Opening accounts receivables)+(Closing accounts receivables)]=$500$29+$20=$491

Working note (4):

Calculate cash payment for rent:

Cash payments for rent}=[(Rent expenses)(Opening rent expense)+(Closing rent expense)]=$250$10+$2=$242

Working note (5):

Calculate cash payments for Insurance:

Cash paymentsfor insurance}=[(Insurance expenses)+(Opening insurance expense)(Closing insurance expense)]=$80+$14$5=$89

Working note (6):

Calculate cash payments for utilities:

Cash payments for utilities}=[(Utilities expenses)+(Opening utilities expense)(Closing utilities expense)]=$50+$60$20=$90

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 12 Solutions

Fundamentals Of Financial Accounting

Ch. 12 - As a junior analyst, you are evaluating the...Ch. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - Prob. 14QCh. 12 - (Supplement 12A) How is the sale of equipment...Ch. 12 - Prob. 1MCCh. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Prob. 4MCCh. 12 - Which of the following would not appear in the...Ch. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - The total change in cash as shown near the bottom...Ch. 12 - Prob. 10MCCh. 12 - Prob. 1MECh. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Determining the Effects of Account Changes on Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 5MECh. 12 - Computing Cash Flows from Investing Activities...Ch. 12 - Computing Cash Flows from Financing Activities...Ch. 12 - Computing Cash Flows Under IFRS Using the data...Ch. 12 - Prob. 9MECh. 12 - Interpreting Cash Flows from Operating, Investing,...Ch. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 13MECh. 12 - Matching items Reported to Cash Flow Statement...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Reporting and Interpreting Cash Flows from...Ch. 12 - Prob. 10ECh. 12 - Prob. 11ECh. 12 - Inferring Balance Sheet Changes from the Cash Flow...Ch. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Prob. 17ECh. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 21ECh. 12 - Prob. 22ECh. 12 - (Supplement 12B) Preparing a Statement of Cash...Ch. 12 - Determining Cash Flow Statement Effects of...Ch. 12 - Prob. 2CPCh. 12 - Prob. 3CPCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5CPCh. 12 - Prob. 6CPCh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PACh. 12 - Prob. 2PACh. 12 - Prob. 3PACh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 6PACh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PBCh. 12 - Prob. 2PBCh. 12 - Prob. 3PBCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5PBCh. 12 - Prob. 6PBCh. 12 - Prob. 1SDCCh. 12 - Prob. 2SDCCh. 12 - Prob. 6SDCCh. 12 - Prob. 7SDCCh. 12 - Prob. 8SDCCh. 12 - Prob. 9SDCCh. 12 - Prob. 1CC
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education