Financial Accounting

Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems.

Statement of Cash Flows

Operating Activities: Direct Method

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1

concept

Direct Method: Cash Received from Customers

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concept

Direct Method: Cash Paid to Suppliers

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concept

Direct Method: Cash Paid for Operating Expenses

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example

Direct Method

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5
Problem

ABC Company is preparing its Statement of Cash Flows using the direct method. The accountant gathered the following information:cash paid to suppliers was $140,000; sales revenue was $350,000; Accounts Receivable increased by $10,000 during the year; depreciation expense was $15,000; operating expenses totaled $80,000; Prepaid Expenses decreased by $8,000 during the year; and a loss on the disposal of plant assets equaled $6,000. What is the cash flow provided by operating activities?

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Problem

During the year, cash paid to suppliers was $340,000. Cash received from customers was $580,000. Cash paid for operating expenses totaled $64,000. Depreciation expense totaled $16,000. The company also purchased equipment for $35,000. Using the direct method, what is the cash provided by operating activities?