The income statement for Rhino Company for the current year

The income statement for Rhino Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows:

1

Sales

$450,000.00

2

Cost of goods sold

151,700.00

3

Gross profit

$298,300.00

4

Operating expenses:

5

Depreciation expense

$37,780.00

6

Other operating expenses

115,450.00

7

Total operating expenses

153,230.00

8

Income before income tax

$145,070.00

9

Income tax expense

39,310.00

10

Net income

$105,760.00

Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required.

1. Cash flows from operating activities:          

2. Cash received from customers      

3   Cash payments for merchandise             

4   Cash payments for operating expenses         

5   Cash payments for income taxes             

6   Net cash flow from operating activities

1	Sales		$450,000.00
2	Cost of goods sold		151,700.00
3	Gross profit		$298,300.00
4	Operating expenses:
5	Depreciation expense	$37,780.00
6	Other operating expenses	115,450.00
7	Total operating expenses		153,230.00
8	Income before income tax		$145,070.00
9	Income tax expense		39,310.00
10	Net income		$105,760.00

Solution

1 Cashflow from operating activities under direct method: Cash received from customers (Note:1) 445620 Cash payment for merchandise (Note:2) 159740 Cash payments for operating expenses (Note:3) 97310 Cash payment for income taxes (Note:4) 39310 Cashflow from operating activities 741980 Notes: 1. Computation of total receipt from customers: Assume all sales as credit sales Analyze Accounts receivable account Beginning balance 31850 Add:Sales 450000 481850 Less:Ending balance 36230 Receipt from customers 445620 2. Computation of payment made to suppliers: Assume all purchase as credit purchase Cost of goods sold=Opening inventory+Purchase-Closing inventory Purchase=151700-81240+93760=164220 Analyze Accounts payable account Beginning balance 63470 Add:purchase 164220 227690 Less:Ending balance 67950 Payment to suppliers 159740 3. Computation of payment made towards operating expenses: Analyze accrued expenses payable Beginning balance 20560 Add:operating expenses (Adjusted with prepaid expenses) (115450+15660-14670) 116440 137000 Less:Ending balance 19130 Expenses paid in cash 97310 4. Computation of payment made towards income tax: Analyze Deferred income tax liability Beginning balance 4390 Add:income tax expenses 39310 43700 Less:Ending balance 4390 Insurance paid 39310