The income statement and a schedule reconciling cash flows f

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Mike Roe Computers.

MIKE ROE COMPUTERS

Income Statement For the Year Ended December 31, 2018

Sales $ 148.00

Cost of goods sold (89.00 )

Gross margin 59.00

Salaries expense $ 18.00

Insurance expense 11.00

Depreciation expense 4.00

Interest expense 5.30 (38.30 )

Gains and losses:

Gain on sale of equipment 10.00

Loss on sale of land (1.00 )

Income before tax 29.70

Income tax expense (14.85 )

Net income $ 14.85

Reconciliation of Net Income to Net Cash Flows from Operating Activities

Net income $ 14.85

Adjustments for noncash effects: Decrease in accounts receivable 5.20

Gain on sale of equipment (10.00 )

Increase in inventory (5.00 )

Increase in accounts payable 8.00

Increase in salaries payable 2.00

Depreciation expense 4.00

Decrease in bond discount 2.65

Decrease in prepaid insurance 1.00

Loss on sale of land 1.00

Increase in income tax payable 5.00

Net cash flows from operating activities $ 28.70

Required:

1. Provide the summary journal entry which shows the cash flow for each of the following for Mike Roe Computers during the reporting period: received from customers, paid to suppliers, paid to employees, paid for interest, paid for insurance, paid for income taxes.

2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Event Account Debit Credit a Cash 153.2 Accounts Receivable 5.2 Sales Revenue 148 b Cost of Goods Sold 89 Inventory 5 Accounts Payable 8 Cash 86 c Salaries Expense 18 Salaries Payable 2 Cash 16 d Interest Expense 5.3 Discount on Bond Payable 2.65 Cash 2.65 e Insurance Expense 11 Prepaid Insurance 1 Cash 10 f Income Tax Expense 14.85 Income Tax Payable 5 Cash 9.85 cash flows from operating activities section Cash Received from Customers 153.2 Cash paid to Suppliers -86 Cash Paid to Employees -16 Cash paid for Interest -2.65 Cash paid for insurance -10 Cash paid for income tax -9.85 Net Cash flor from operating activities 28.7