Macgregor Company completed its first year of operations on

Macgregor Company completed its first year of operations on December 31, 2017. Its initial income statement showed that Macgregor had revenues of $197,800 and operating expenses of $74,500. Accounts receivable and accounts payable at year-end were $61,100 and $31,900, respectively. Assume that accounts payable related to operating expenses. Ignore income taxes. Compute net cash provided by operating activities using the direct method.

Solution

Cash receipts from customers: Start with sales $197800, then subtract year-end accounts receivable ($61,100), because they haven\'t been collected from customers yet. The answer is cash receipts from customers $136,700..

Cash payments for operating expenses: Start with expenses $74,500, then subtract year-end accounts payable (31,900), because they haven\'t been paid to vendors yet. The answer is cash payments for operating expenses 42,600.

Cash receipts from customers$136,700..
Minus cash payments for operating expenses (42,600)
Equals net cash provided by operating activities $94,100