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Question:Data for the Vince Gill Company are presented in E23-3.

Instructions

Prepare the operating activities section of the statement of cash flows using the direct method.

Short Answer

Expert verified

Answer

The net cash provided by operating activities is computed as $1,225,000

Step by step solution

01

Computation of cash receipts from customers

Cashreceiptsfromcustomers=SalesRevenue+Decreaseinaccountsreceivables=6,900,000+360,000=$7,260,000

02

Computation of cash payment to suppliers

Amount ($)

Cost of goods sold

4,700,000

Less: Decrease in Inventories

-300,000

Purchases

4,400,000

Add: Decrease in accounts payable

275,000

Cash Payments to suppliers

4,675,000

03

Computation of cash payment for operating expenses

Amount ($)

Amount ($)

Cash payments for operating expenses

Operating expenses, exclusive of depreciation [450,000+(700,000-60,000)]

1,090,000

Add: Increase in prepaid expenses

170,000

Decrease in accrued prepaid expenses payable

100,000

270,000

Cash Payment for operating expenses

1,360,000

04

Preparation statement of cash flow (partial)



VINCE GILL COMPANY
Partial Statement of Cash Flows

For the year ended December 31, 2017


Cash flows from operating activities

Cash Receipts from customers

$7,260,000

Cash Payments:

To suppliers

$4,675,000

For Operating expenses

1,360,000

6,035,000

Net cash provided by operating activities

$1,225,000

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