Question

The two independent cases are listed below: Case A Case B Year 2 Year 1 Year 2 Year 1 Sales Revenue $ 11,200 $ 9,200 $ 22,000 $ 18,200 Cost of Goods Sold 6,100 5,600 12,400 11,100 Gross Profit 5,100 3,600 9,600 7,100 Depreciation Expense 1,020 1,020 1,520 1,520 Salaries and Wages Expense 2,600 2,020 5,200 5,020 Net Income 1,480 560 2,880 560 Accounts Receivable 310 410 760 610 Inventory 760 510 750 810 Accounts Payable 820 720 810 870 Salaries and Wages Payable 1,200 1,220 210 260 Compute the net cash flow from operating activities section of the Year 2 statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Case A Case B

Year 2 Year 1 Year 2 Year 1

Sales Revenue $11,200 $9,200 $22,000 $18,200

Cost of Goods Sold 6,100 5,600 12,400 11,100

Gross Profit 5,100 3,600 9,600 7,100

Depreciation Expense 1,020 1,020 1,520 1,520

Salaries and Wages Expense 2,600 2,020 5,200 5,020

Net Income 1,480 560 2,880 560

Accounts Receivable (100) 150 310 410 760 610

Inventory 250 (60) 760 510 750 810

Accounts Payable 100 (60) 820 720 810 870

Wages Payable (20) (50) 1,200 1,220 210 260

Cash flow Case A = $1,480 (net income) + $1,020 (depreciation) + $100 (accounts receivable decrease) - $250 (inventory increase) + $100 (accounts payable increase) - $20 (wages payable decrease) = $2,430

Cash flow Case B = $2,880 (net income) + $1,520 (depreciation) - $150 (accounts receivable increase) + $60 (inventory decrease) - $60 (accounts payable decrease) - $50 (wages payable decrease) = $4,200