Question

The income statement of Bingham Inc. for the year ended December 31, Year 2, reported the following condensed information: Service revenue $600,000 Operating expenses 360,000 Income from operations $240,000 Income tax expense 60,000 Net income $180,000 Bingham's balance sheet contained the following comparative data on December 31: Year 2 Year 1 Accounts receivable $50,000 $40,000 Accounts payable 35,000 50,000 Income taxes payable 6,000 3,000 Bingham has no depreciable assets. Accounts payable pertains to operating expenses. Required: Prepare the operating activities section of the statement of cash flows using the direct method. BINGHAM INC. Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities $ Cash payments: $ Net cash provided by operating activities

Answer 1

$158,000

Step-by-step explanation:

The computation of the operating activities using the direct method is shown below:

Cash flow from operating activities

Cash received from customer ($40,000 + $600,000 - $50,000) $590,000

Less:

Cash paid for operating expenses ($50,000 + $360,000 - $35,000) -$375,000

Cash paid for income taxes ($3,000 + $60,000 -$6,000) -$57,000

Net cash flow from operating activities $158,000

The negative sign reflects the cash outflow while the positive sign depicts the cash inflow