The following accounts and corresponding balances were drawn from Marinelli Company's 2014 and 2013 year-end balance sheets:
.:.
The 2014 income statement is shown below:
Income Statement
Sales ………………………………………….. $530,000
Salary expense ……………………………….. (214,000)
Other operating expenses …………………….. (175,000)
Operating income …………………………….. 141,000
Nonoperating items: Interest revenue ………… 16,500
Net income …………………………………… $157,500
🔒
Unlock the complete assignment
You are viewing the free preview. Purchase this assignment once to reveal the complete resource.
$9.99 USD
Secure checkout is completed by Stripe.
Required
a. Use the direct method to compute the amount of cash inflows from operating activities.
b. Use the direct method to compute the amount of cash outflows from operating activities.
SOLUTION:
a.
| Reconciliation of Accounts Receivable | | | | |
|---|
| Beginning balance | $ 31,600 | $ 31,600 | | |
| Increase due to revenue recognized on account | 530,000 | 530,000 | | |
| Decrease due to cash collections from customers | ? | ? | = (526,400) | = (526,400) |
| Ending balance | $ 35,200 | $ 35,200 | | |
| Reconciliation of Interest Receivable | Reconciliation of Interest Receivable | | | | |
| Beginning balance | Beginning balance | $ 4,800 | $ 4,800 | | |
| Increase due to interest revenue recognized on acct. | Increase due to interest revenue recognized on acct. | 16,500 | 16,500 | | |
| Decrease due to cash collections of interest rec. | Decrease due to cash collections of interest rec. | ? | ? | = (17,100) | = (17,100) |
| Ending balance | Ending balance | $ 4,200 | $ 4,200 | | |
| Cash Inflow from Operating Activities |
|---|
| Collections from customers | $526,400 |
| Collections of interest | 17,100 |
| Net cash inflow from operating activities | $543,500 |
b.
| Reconciliation of Other Operating Expenses Payable |
|---|
| Beginning balance | $ 18,500 | |
| Increase due to expenses recognized on account | 175,000 | |
| Decrease due to payment to vendors | ? | = (172,500) |
| Ending balance | $ 21,000 | |
| Reconciliation of Salaries Payable | | |
|---|
| Beginning balance | $ 7,200 | |
| Increase due to salaries expense recognized | 214,000 | |
| Decrease due to cash paid for salaries | ? | = (214,700) |
| Ending balance | $ 6,500 | |
| Cash Outflow from Operating Activities |
|---|
| Cash paid for other operating expenses | $172,500 |
| Cash paid for salaries | 214,700 |
| Net cash outflow from operating activities | $387,200 |