The income statement for Rhino Company for the current year ended June 30 and balances of selected

The income statement for Rhino Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows:




Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $445,500
Cost of merchandise sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $291,500
Operating expenses:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,500
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,280
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,780
Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $137,720
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,600
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,120
End
of Year
Beginning
of Year
Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,300 $31,240
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,400 80,300
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,520 15,840
Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . . . 67,540 62,700
Accrued expenses payable (operating expenses) . . . . . . . . . . . . . . . 19,140 20,900
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,400 4,400

Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method.


Answer:

Cash flows from operating activities:
Cash received from customers……………………… $440,4401
Deduct: Cash payments for merchandise………… $161,2602
Cash payments for operating
expenses…………………………………… 115,7203
Cash payments for income taxes……… 39,600 316,580
Net cash flow from operating activities…………… $123,860
Computations:
1. Sales……………………………………………………………………………………… $445,500
Deduct increase in accounts receivable…………………………………………… 5,060
Cash received from customers……………………………………………………… $440,440
2. Cost of merchandise sold…………………………………………………………… $154,000
Add increase in inventories…………………………………………………………… 12,100
$166,100
Deduct increase in accounts payable……………………………………………… 4,840
Cash payments for merchandise…………………………………………………… $161,260
3. Operating expenses other than depreciation……………………………………… $115,280
Add decrease in accrued expenses payable……………………………………… 1,760
$117,040
Deduct decrease in prepaid expenses……………………………………………… 1,320
Cash payments for operating expenses…………………………………………… $115,720