Operating Cash Flows, Direct Method

The income statement for Piura Merchandising Corporation is as follows:

Piura Merchandising Corporation

Income Statement

For the year ended December $31,20$X$1$

Line Item Description Amount Amount

Revenues $$1,425,000$

Cost of goods sold

Beginning inventory $$410,000$

Purchases $770,000$

Less ending inventory $310,000870,000$

Gross margin $555,000$

Operating expenses

Depreciation $63,000$

Amortization of patent $18,500$

Wages expense $61,000$

Insurance expense $35,000177,500$

Income before taxes $$377,500$

Income taxes $($all current$)(105,000)$

Net income $$272,500$

Other information is as follows:

Accounts payable decreased by $$23,000$ during the year.

Accounts receivable increased by $$19,000.$

All wages were paid at the beginning of the year; at the end of the year, wages payable had a balance of $$10,500.$

Prepaid insurance increased by $$19,000$ during the year.

Prepare a schedule of operating cash flows using the direct method. $($Note: Begin by entering the applicable income statement amounts. In the Adjustments column, if an account has more than one adjustment, enter the total effect of all adjustments in the applicable cell. Use a minus sign to indicate a negative adjustment or a negative cash outflow.$)$

Piura Merchandising Corporation

Cash Flows from Operating Activities, Direct Method

For the Year Ended December $31,20$X$1$

Line Item Description Income Statement Adjustments Cash Flows