Case Studv 3

XYZ Inc. is preparing its cash flow statement under the direct method and has provided this information:
Net credit sale $5,000,000
Accounts receivable, end of the year 1,500,000
Accounts receivable, beginning of the year 2,500,000
Purchases (on account) 4,000,000
Trade payable, end of the year 1,900.000
Trade payable, beginning of the year 2,000,000
Operating expenses 3,000,000
Accrued expenses, beginning of the year 500,000
Accrued expenses, end of the year 400,000
Depreciation on property, plant, and equipment. 600,000

Required: For the purposes of the cash flow statement under the direct method, you are required to
compute cash collections from customers, payments to suppliers, and cash paid for operating expenses.

Case study #4
Client Inc. has provided the following information and requests you to prepare the operating
activities of the cash flow statement under the indirect method

Net income before taxes $400,000

Depreciation on property, plant, and equipment 200,000
Loss on sale of building 100,000
Interest expense 150.000
Interest payable, beginning of the year 100,000
Interest payable, end of the year 50,000
income taxes paid 100,000
Accounts receivable, beginning of the year 500,000
Accounts receivable, end of the year 850,000
Inventory, beginning of the year 500,000
Inventory, end of the year 400,000
Accounts payable, beginning of the year 200,000
Accounts payable, end of the year 500,000
Required:
Required: Prepare the operating activities section of the Statement of cash flows

Case study #4

Net income before taxes $400,000

Adjustments
Depreciation on property, plant, and equipment +200,000
Loss on sale of building +100,000
Accounts receivable -350, 000
Accounts payable +300,000
Inventory +100,000
Interest payable -50,000
Total adj. 200,000
Income taxes paid -100,000
Total net cash flow from operating activity 500,000