Wayzata Company saw its cash plummet by $110,000 in 20X0. The companys president wants an explanation of
Question:
Wayzata Company saw its cash plummet by $110,000 in 20X0. The company’s president wants an explanation of what caused the decrease in cash despite income of $60,000. He has asked you to prepare both direct and indirect method statements of cash flows from operations for 20X0. You have discovered the following information:
• Sales, all on credit, were $560,000.
• Accounts receivable increased by $130,000.
• Cost of goods sold was $390,000.
• Payments to suppliers were $455,000.
• Accounts payable decreased by $40,000.
• Inventory increased by $25,000.
• Operating expenses were $95,000 all paid in cash except for depreciation of $30,000.
• Income tax expense was $15,000; taxes payable decreased by $5,000.
1. Prepare a statement of cash flows from operating activities using the direct method.
2. Prepare a statement of cash flows from operating activities using the indirect method.
3. Explain why cash decreased by $110,000 when net income was a positive $60,000.
Accounts PayableAccounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
1 WAyZATA Company Statement of Cash Flows from Operating Activities For the Year 20X0 Direct Method ...View the full answer
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick
