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This post addresses the Melvin Company cash flows exercise.

Melvin Company's income statement for the year ended December 31, 2012, contained the following condensed information.

Revenue from fees $830,220
Operating expenses (excl. depreciation) $625,300
Depreciation expense 62,250
Loss on sale of equipment 28,130
715,680

Income before taxes 114,540
Income tax expense 39,140

Net income $75,400

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

2012 2011
Accounts receivable $36,330 $58,320
Accounts payable 46,020 30,620
Income taxes payable 4,500 8,070

(Accounts payable pertains to operating expenses.)

Instructions

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

Solution Preview

The operating activities section under the direct method will look like this:

Cash flows from operating activities

Cash receipts from customers (830220 - 21990 (difference in A/R) 808,230
Cash payments, for ...

Solution Summary

The solution provides the correct presentation of the operating activities section of the statement of cash flows using the direct method for Melvin Company.

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