: Operating Activities : Direct Method

Required: Using the Direct Method, prepare only the Operating Activity Section of the Statement of Cash Flows for the Year Ending 12/31/2019.

Gallatin Grocery

Comparative Balance Sheets at:

Dec. 31, 2019Dec. 31, 2018

Assets

Cash$ 65,000$ 125,000

Accounts Receivable 85,00025,000

Inventory 100,000 50,000

Building300,0000

Accumulated Depreciation -(10,000)0

Total Assets$ 540,000$200,000

Liabilities and Owner Equity

Accounts Payable $ 155,000$45,000

Note Payable (due 2030)170,0000

Common Stock100,000100,000

Retained Earnings115,00055,000

Total Liabilities and Owner Equity$540,000$200,000

Gallatin Grocery

Income Statement for Year Ending 12/31/2018

Sales Revenue$ 2,000,000

Cost of Goods Sold1,750,000

Gross Profit 250,000

Operating Expenses:125,000

Depreciation Expense10,000

Operating Income115,000

Interest Expense 15,000

Income Before Income Taxes100,000

Income Tax Expense30,000

Net Income$ 70,000

Additional Information:

1) Accounts Payable relate to merchandise purchases on account.

2) Dividends of $10,000 were made during the year.

Required: Using the Direct Method, prepare only the Operating Activity Section of the Statement of Cash Flows for the Year Ending 12/31/2019.