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    This post addresses the Melvin Company cash flows exercise.

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    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.

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    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.

    $2.49

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