Question

Preparing operating activities using the direct method Amy’s Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business’s statement of cash flows for the year ended June 30, 2018, using the direct method.

Short answer

Net cash provided by operating activities is $7,000.

Step-by-step solution

Step-by-Step SolutionStep 1: Cash flow from operating activities

Cash flows from operating activities
Receipts:
Collection from customers	$188,000
Payments:
To suppliers	($115,000)
To employees	($66,000)
Net cash provided by operating activities		$7,000

Classification of investing and financing activity

Transaction	Activity
Cash payment for purchase of equipment	Investing
Payment of notes payable	Financing
Payment of dividends	Financing
Cash receipt from issuance of stock	Financing
Cash receipt from sale of land	Investing