Question 4

Determining Operating Cash FlowsDirect Method

Guccii Corporations recent comparative balance sheet and income statement follow:

Balance Sheets, December 31	2019	2020
Assets
Cash and cash equivalents	$30,000	$43,000
Investments, short-term	0	6,000
Accounts receivable, net	34,000	42,000
Merchandise inventory	20,000	30,000
Investments, long-term	0	20,000
Plant assets, net	120,000	118,000
Patents	6,000	5,400
Other assets	14,000	14,000
Total assets	$224,000	$278,400
Liabilities and Stockholders Equity
Accounts payable	$24,000	$44,000
Accrued expenses payable	0	17,400
Bonds payable	80,000	40,000
Common stock, par $10	70,000	80,000
Additional paid-in capital	0	9,000
Retained earnings	50,000	88,000
Total liabilities and stockholders equity	$224,000	$278,400

Income Statement, For Year Ended December 31	2020
Sales revenue	$208,000
Cost of goods sold	(110,000)
Depreciation expense	(16,000)
Patent amortization	(600)
Other operating expenses	(35,400)
Net income	$46,000

Additional information for 2020 1. Retired bonds paying $40,000 cash. 2. Bought long-term debt investment in securities, $20,000 cash. 3. Purchased a plant asset, $14,000 cash. 4. Purchased short-term investment in securities (not held in a trading account), $6,000 cash. 5. Declared and paid cash dividends, $8,000. 6. Issued capital stock, 1,000 shares at $19 cash per share.

Required

Prepare the operating activities section of the statement of cash flows, using the direct method. Assume there is no bad debt expense.

Note: Use negative signs with amounts for cash outflows.

Cash Flows from Operating Activities
Collections from customers	Answer
Payments to suppliers	Answer
Other operating expenses	Answer
Net cash provided (used) by operating activities	Answer