Question

Portions of the financial statements for Peach Computer are provided below.

PEACH COMPUTER
Income Statement
For the year ended December 31, 2021
Net sales $1,800,000
Expenses:
Cost of goods sold $1,050,000
Operating expenses 560,000
Depreciation expense 50,000
Income tax expense 40,000
Total expenses 1,700,000
Net income $100,000
PEACH COMPUTER
Selected Balance Sheet Data
December 31
2021 2020 Increase (I) or Decrease (D)
Cash $102,000 $85,000 $17,000 (I)
Accounts receivable 45,000 49,000 4,000 (D)
Inventory 75,000 55,000 20,000 (I)
Prepaid rent 3,000 5,000 2,000 (D)
Accounts payable 45,000 37,000 8,000 (I)
Income tax payable 5,000 10,000 5,000 (D)
Required:
Prepare the operating activities section of the statement of cash flows for Peach Computer using the direct method.

Answer 1

Net cash flows from Operating activities = $139,000

Step-by-step explanation:

Statement of Cash Flows

Cash-flows from Operating activities

Net income for the year $100,000

Adjustment for non-cash effects

Depreciation expenses $50,000

Decrease in Accounts receivables $4,000

Increase in Inventory -$20,000

Decrease in Prepaid rent $2,000

Increase in Accounts payable $8,000

Decrease in Income tax payable -$5,000 $39,000

Net cash flows from Operating activities $139,000