Question

Omega Company's accountants have just completed the income statement and balance sheet for the year and have provided the following information (dollars in thousands): INCOME STATEMENT Sales revenue $ 20,760 Expenses Cost of goods sold $ 9,160 Depreciation expense 2,960 Salaries expense 4,120 Rent expense 2,840 Insurance expense 930 Utilities expense 870 Interest expense on bonds 950 Loss on sale of investments 730 22,560 Net loss $ (1,800 ) SELECTED BALANCE SHEET ACCOUNTS Prior Year Current Year Merchandise inventory $ 75 $ 91 Accounts receivable 537 447 Accounts payable 215 262 Salaries payable 17 39 Rent payable 20 10 Prepaid rent 7 4 Prepaid insurance 14 19 Other Data: The company issued $19,000, 10 percent bonds payable at par during the year. Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. (List cash outflows as negative amounts. Enter your answers in thousands.)

Answer 1

$2,217

Step-by-step explanation:

The preparation of the cash flows from operating activities using the direct method is shown below:

Cash flow from Operating Activities - Direct Method

Cash Receipt from Customers $20,850

(Sales revenue + reduction in Account receivable)

Less: Cash Payment to supplier -$9,129

(Cost of Goods sold - increment in Account payable + Increment in inventory)

Less: Cash Payment for Salaries -$4,142

(Salaries Expense - Increment in Salaries Payable)

Less: Cash Payment for Rent -$2,827

(Rent Expense - Increment in Rent Payable - reduction in Prepaid Rent)

Less: Cash Payment for Insurance -$935

(Insurance Expense + Increment in Prepaid Insurance)

Less: Cash Payment for Utilities -$870

(Utilities Expense - Increment in Utilities Payable)

Less: Cash Payments for Bond interest -$730

Net Cash Provided by Operating Activities $2,217