The income statement and selected balance sheet information for Direct Products Company for the year ended December 31 are presented below. Income Statement Sales Revenue $ 48,600 Expenses: Cost of Goods Sold 21,000 Depreciation Expense 2,000 Salaries and Wages Expense 9,000 Rent Expense 4,500 Insurance Expense 1,900 Interest Expense 1,800 Utilities Expense 1,400 Net Income $ 7,000 Selected Balance Sheet Accounts Ending Balances Beginning Balances Accounts Receivable $ 560 $ 580 Inventory 990 770 Accounts Payable 420 460 Prepaid Rent 25 20 Prepaid Insurance 25 28 Salaries and Wages Payable 100 60 Utilities Payable 20 15 Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Cash flow from Operating Activities

Cash Receipts from Customers                                 $48,620

Cash Paid to Suppliers and Employees                     ($17,017)

Cash Generated from Operations                              $31,603

Interest Paid                                                                 ($1,800)

Cash flow from Operating Activities                          $29,803

Explanation:

Cash flow from Operating Activities relate to cash movement as a result of trading in the course of business.

Cash Receipts from Customers Calculation :

Prepare a Total Trade Receivables T - Account as follows :

Debit :

Beginning Balance                                $ 580

Sales Revenue                                 $ 48,600

Totals                                                  $49,180

Credit :

Ending Balance                                    $ 560

Cash Receipt (Balancing Figure)    $48,620

Totals                                                 $49,180

Cash Paid to Suppliers and Employees Calculation :

Cost of Goods Sold                                                      21,000

Add Other Expenses

(Excluding Depreciation and Interest Expense)

Salaries and Wages Expense                                      9,000

Rent Expense                                                                4,500

Insurance Expense                                                        1,900

Utilities Expense                                                            1,400

Increase in Inventory                                                       220

Decrease in Accounts Payable                                         40

Decrease in Prepaid Insurance                                         (3)

Increase in Prepaid Rent                                                    5

Increase in Wages Payable                                             (40)

Increase in Utilities Payable                                              (5)

Cash Paid to Suppliers and Employees                      17,017

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