Computation of Operating ActivitiesDirect Method)

(LO 2, 3) 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, 2017. 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 $310,000 and operating expenses (exclusive of depreciation) $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.