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Operating Cash Flows (Direct Method)
The Washington Company owns no plant assets and had the following income statement for the year:
| Sales revenue | | $900,000 |
| Cost of goods sold | $470,000 | |
| Wages expense | 120,000 | |
| Rent expense | 50,000 | |
| Insurance expense | 15,000 | 655,000 |
| Net income | | $245,000 |
Additional information about the company includes:
| | End of Year | Beginning of Year |
| Accounts receivable | $54,000 | $51,000 |
| Inventory | 60,000 | 76,000 |
| Prepaid insurance | 8,000 | 7,000 |
| Accounts payable | 24,000 | 18,000 |
| Wages payable | 7,000 | 11,000 |
Calculate the cash flow from operating activities using the direct method. Show a related cash flow for each revenue and expense.
Hint: Remember to enter cash outflow answers (transactions that reduce cash) and expenses (COGS and wages) as negative numbers.
| Sales Revenue | |
| Accounts Receivable Increase | |
| Cash Received from Customers | |
| Cost of Goods Sold | |
| Inventory Decrease | |
| Accounts Payable Increase | |
| Cash Paid for Merchandise Purchased | |
| Wages Expense | |
| Wages Payable Decrease | |
| Cash Paid to Employees | |
| Insurance Expense | |
| Prepaid Insurance Increase | |
| Cash Paid for Insurance | |
| Cash Flow from Operating Activities | |
| Cash Received from Customers | |
| Cash Paid for Merchandise Purchased | |
| Cash Paid to Employees | |
| Cash Paid for Rent | |
| Cash Paid for Insurance | |
| Cash Provided by Operating Activities | |
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