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Direct method of cash flows

(Preparation of Operating Activities Section-Direct Method)

Norman Company's income statement for the year ended December 31, 2010, contained the following condensed information.

Revenue from fees $840,000 cr
Operating expenses (excl. depreciation) $624,000 db
Depreciation expense 60,000 db
Loss on sale of equipment 26,000 db
710,000 cr

Income before taxes 130,000 cr
Income tax expense 40,000 cr

Net income $90,000 cr

Norman's balance sheet contained the following comparative data at December 31.

2010 2009
Accounts receivable $37,000 $59,000
Accounts payable 46,000 31,000
Income taxes payable 4,000 8,500

(Accounts payable pertains to operating expenses.)


Complete the operating activities section of the statement of cash flows using the direct method. (Enter all amounts as positive and subtract where necessary. List amounts from largest to smallest eg 10, 5, 3, 2.)


Solution Preview

Partial Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from operating activities
Cash collected from customers...................................$862,000
Cash paid to vendors for operating ...

Solution Summary

A schedule is shown for you and a tutorial explains why the adjustments are as shown.