Presented below are two independent situations. Situation A: Annie Lennox Co. reports revenues of $200,000 and operating

Question:

Presented below are two independent situations.

Situation A:

Annie Lennox Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations,

2008. Accounts receivable and accounts payable at year-end were $71,000 and $29,000, respectively. Assume that the accounts payable related to operating expenses. Ignore income taxes.

Instructions

Using the direct method, compute net cash provided by operating activities.

Situation B:

The income statement for Blues Traveler Company shows cost of goods sold of $310,000 and operating expenses (exclusive of depreciation) of $230,000. The comparative balance sheet for the year shows that inventory increased $26,000, prepaid expenses decreased $8,000, accounts payable (related to merchandise) decreased $17,000, and accrued expenses payable increased $11,000.

Instructions

Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.

Accounts Payable
Accounts 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... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...