Question

Refer to Golden Corporation’s financial statements and related information in Problem 12-6A.

Required

Prepare a complete statement of cash flows; report its cash flows from operating activities according to the direct method.

Short answer

Cash generated from operating activities totals$122,000.

Step-by-step solution

Definition of Cash Dividend

A cash dividend can be defined as the cash payment made to the shareholder as their share of the profit generated by the business entity. It is deducted for the determination of ending retained earnings.

Cash flow statement under the direct method

Particular	Amount $	Amount $
Cash flow operating activities:
Cash from customer		$1,780,000
Cash paid to vendor		(1,145,000)
Income tax expenses		(19,000)
Cash paid for operating expenses		(494,000)
Cash flow from operating activities		$122,000
Cash flow from investing activities:
Purchased equipment	(36,000)
Cash flow used in investing activities		($36,000)
Cash flow from financing activities:
Common stock issued	60,000
Cash dividend paid	(89,000)
Cash flow from financing activities		($29,000)
Net changes in cash		$57,000
Add: Beginning cash balance		107,000
Ending cash balance		$164,000

Calculations

1. Receipt from sales

Particular	Amount
Sales	$1,792,000
Less: Increase in accounts receivable	($12,000)
Receipt from sales to customers	$1,780,000

2. Payment for inventory

Particular	Amount
Cost of goods sold	$1,086,000
Add: Increase in inventory	$75,000
Less: Increase in accounts payable	($16,000)
Payment for inventory	$1,145,000

3. Payment for Taxes

Particular	Amount
Income tax expense	$22,000
Less: Increase in income tax payable	($3,000)
Payment for taxes	$19,000