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Prepare a cash flow statement using the direct method

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Problem 8:

The owner of a small business has asked you to prepare a statement that will show him where his firm's cash came from and how it was used this year. He gives you the following information based on the Cash account in his general ledger.

Balance at beginning of year $3,450
Collection of accounts receivable $34,500
Interest on savings account $345
Sale of old machine $3,105
Cash sales $27,600
Total $69,000
Payment on vendor accounts $17,250
Cash purchase of supplies $345
Cash purchase of inventory $17,250
Down payment on new truck $3,450
Rent payments $8,625
Utilities $2,070
Interest payment $1,035
Other miscellaneous expenses $1,725
Payment on debt $3,450
Part-time help $6,900 $62,100
Balance at end of year $6,900

In addition, the following is available from company records:

1. Sales were $61,410 for the year.
2. The Accounts Receivable balance decreased by $690.
3. Cash operating expenses totaled $54,165 (including cost of sales, supplies, rent, utilities, part-time help, and other miscellaneous expenses.
4. Accounts Payable decreased by a net of $2,760 during the year.
5. The Inventory balance remained constant throughout the year.
6. Deprecation of $1,725 was taken this year.


Prepare a cash flow statement using the direct method.

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Solution Preview

Please see the attached Excel spreadsheet.

Cash Flows From Operating Activities
Cash Receipts From Customers 62100
Cash Paid to Suppliers and Employees -41745
Cash Generated ...

Similar Posting

Preparing the statement of cash flows - direct method

The income statement and additional data of Capitol Hill Corporation follow:

Capitol Hill Corporation
Income Statement
Year ended June 30, 2006

Sales revenue - $229,000
Dividend revenue - 8,000 $237,000
Cost of goods sold - $103,000
Salary expense - 45,000
Depreciation expense - 28,000
Advertising expense - 12,000
Interest expense - 2,000
Income tax expense - 9,000 199,000
Net income - $38,000

Additional data:
a. Collections from customers are $15,000 more than sales.
b. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
c. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
d. Payments to employees are $1,000 more than salary expense.
e. Acquisition of planet assets is $101,000
f. Cash receipts from sale of land total $24,000
g. Cash receipts from issuance of common stock total $30,000
h. Payment of long term note payable is $15,000
i. Payment of dividends is $11,000
j. Cash balance, June 30, 2005, was $20,000; June 30, 2006, was $27,000

Please prepare Capitol Hill statement of cash flows for the year ended June 30, 2006. Use the direct method and use the attached spreadsheet for format. Any help is appreciated. Thank you

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