Question

Pearl Company’s income statement for the year ended December 31, 2020, contained the following condensed information. Service revenue $842,000 Operating expenses (excluding depreciation) $626,000 Depreciation expense 61,000 Loss on sale of equipment 27,000 714,000 Income before income taxes 128,000 Income tax expense 40,000 Net income $88,000 Pearl’s balance sheet contained the following comparative data at December 31. 2020 2019 Accounts receivable $37,000 $56,000 Accounts payable 39,000 33,000 Income taxes payable 4,100 8,400 (Accounts payable pertains to operating expenses.) Prepare the operating activities section of the statement of cash flows using the direct metho

Answer 1

Pearl Company

Cashflow Statement-Direct Method

For the year ended 31 December 2020

Step-by-step explanation:

Cashflow from Operating Activities Amount in $

Cash Receipts from customers ($56,000+$842,000-$37,000) 861,000

Cash paid to suppliers ($33,000+$626,000-$39,000) (620,000)

Income Tax Paid ($8,400+$40,000-$4,100) (44,300)

Net Cash generated from operating activities 196,700