Question

Russell company reports sales revenue of $33,400 and interest revenue of $8,400. its comparative balance sheet shows that accounts receivable decreased $7,400 and interest receivable increased $1,850. compute cash provided by operating activities using the direct method.

Answer 1

To compute the cash provided by operating activities using the direct method, we need to consider changes in accounts receivable and interest receivable. The result is $36,250.

Step-by-step explanation:

To compute the cash provided by operating activities using the direct method, we need to consider changes in accounts receivable and interest receivable. In this case, accounts receivable decreased by $7,400, which means that the company collected $7,400 more from its customers than it recorded as revenue.

On the other hand, interest receivable increased by $1,850, indicating that the company earned more interest revenue than it received in cash. Therefore, we need to subtract the decrease in accounts receivable ($7,400) and add the increase in interest receivable ($1,850) to the reported sales revenue ($33,400) and interest revenue ($8,400) to find the cash provided by operating activities. The calculation is as follows:

Cash provided by operating activities = Sales revenue + Interest revenue - Decrease in accounts receivable + Increase in interest receivable

Cash provided by operating activities = $33,400 + $8,400 - $7,400 + $1,850 = $36,250