Question

The income statement and additional data of Rolling Hills Corporation follow Prepare Rolling Hills Corporation's statement of cash flows for the year ended June 30, 2018. Use the direct method. (Use parentheses or a minus sign for numbers to be subtracted. If a box is not used in the statement leave the box empty; do not select a label or enter a zero.) Complete the statement one section at a time, beginning with the cash flows from operating activities. Rolling Hills Corporation Statement of Cash Flows Year Ended June 30, 2018 Cash Flows from Operating Activities Receipts Total Cash Receipts Payments Total Cash Payments Net Cash Provided by (Used for) Operating Activities

Rolling Hills Corporation Income Statement Year Ended June 30, 2018 Net Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses $ 228,000 109,000 119,000 Salaries Expense Depreciation Expense-Plant Assets Advertising Expense Total Operating Expenses $ 44,000 22,000 14,000 80,000 39,000 Operating Income Other Income and (Expenses) Dividend Revenue Interest Expense Total Other Income and (Expenses) 7,500 (5,000) Net Income Before Income Taxes Income Tax Expense Net Income 2,500 41,500 7,000 $ 34,500
a. Collections from customers are $17,000 more than sales. b. Dividend revenue interest expense, and income tax expense equal their cash amounts. c. Payments to suppliers are the sum of cost of goods sold plus advertising expense d. Payments to employees are $1,000 more than salaries expense. e. Cash payment for the acquisition of plant assets is $104,000 f. Cash receipts from sale of land total $21,000 g. Cash receipts from issuance of common stock total $34,000 h. Payment of long-term notes payable is $20,000 i. Payment of dividends is $9,500. Cash balance at June 30, 2017, was $26,000; at June 30, 2018, it was $20,000

Answer 1

Rolling Hills Corporation

Statement of Cash Flows for the year ended June 30, 2018, using the direct method:

Cash flows from operating activities:

Cash collections from customers $ 245,000

Cash paid to suppliers (123,000)

Cash to employees: ($45,000)

Income tax ($7,000)

Net Cash from operating activities $70,000

Net Cash Provided by (Used for) Operating Activities $70,000

Cash flows from investing activities:

Cash for plant acquisition ($104,000)

Cash from sale of land $21,000

Cash from Dividend revenue $7,500

Net Cash flows from investing (75,500) (75,500)

Cash flows from financing activities:

Cash from issuance of common stock $34,000

Payment for long-term notes payable (20,000)

Dividends payment (9,500)

Interest (5,000)

Net Cash flows from financing activities (500) (500)

Net cash outflows (6,000)

Step-by-step explanation:

a) Data and Calculations:

Rolling Hills Corporation Income Statement Year Ended June 30, 2018

Net Sales Revenue $ 228,000

Cost of Goods Sold 109,000

Gross Profit 119,000

Operating Expenses:

Salaries Expense $ 44,000

Depreciation Expense

-Plant Assets 22,000

Advertising Expense 14,000

Total Operating Expenses 80,000

Operating Income 39,000

Other Income and (Expenses)

Dividend Revenue 7,500

Interest Expense (5,000)

Total Other Income

and (Expenses) 2,500

Net Income Before Taxes 41,500

Income Tax Expense 7,000

Net Income $ 34,500

b) Cash collections from customers:

Net Sales Revenue $ 228,000

More than 17,000

Total cash collections $ 245,000

c) Cash from Dividend revenue = $7,500

d) Cash Payment:

Interest = $5,000

Income tax = $7,000

Suppliers: $123,000

e) Payment to suppliers:

Cost of goods sold 109,000

Advertising 14,000

Cash payments $123,000

f) Payment to employees:

Cash to employees: = $45,000 ($44,000 + 1,000)

g) Cash for plant acquisition = $104,000

h) Cash from sale of land = $21,000

i) Cash from issuance of common stock = $34,000

j) Payment for long-term notes payable = $20,000

k) Dividends payment = $9,500

l) Rolling Hills Corporation can use the direct method for preparing its Statement of Cash Flows for the year ended June 30, 2018. It is one of the two methods in use. The other is the indirect method. The direct method uses only the actual cash receipts and payments to prepare the statement, under the three classifications of cash flows into operating, investing, and financing activities sections.