Problem:
The following data have been taken from the accounting records of Lam Electronics Corp. at December
31:
END OF
YEAR
Balance sheet account:
Accounts receivable………………………………………………
Accrued interest receivable…………………………………..
Inventories…………………………………………………………….
Short-term prepayments……………………………………….
Accounts payable (merchandise supplies)…………….
Accrued operating expenses payable…………………….
Accrued interest payable……………………………………….
Accrued income taxes payable………………………………
Income statement amounts:
Net sales………………………………………………………………..
Dividend income……………………………………………………
Interest revenue……………………………………………………
Cost of goods sold…………………………………………………
Operating expenses………………………………………………
Interest expense……………………………………………………
Income taxes expense…………………………………………..
$ 600,000
6,000
800,000
20,000
570,000
65,000
21,000
22,000
BEGINNING
OF YEAR
$ 720,000
4,000
765,000
15,000
562,000
94,000
12,000
35,000
2,950,000
104,000
70,000
1,550,000
980,000
185,000
110,000
Additional information:
1) Dividend revenue is recognized on the cash basis. All other income statement amounts are
recognized on the accrual basis.
2) Operating expenses include depreciation expense of $ 115,000.
Instructions:
Prepare a partial statement of cash flows, including only the operating activities section of the
statement. Show supporting computations for the amounts of:
1)
2)
3)
4)
Cash received from customers.
Interest and dividends received.
Cash paid to suppliers and employees.
Interest and income taxes paid.
Solution:
1) Cash received from customers.
Cash received from customers =
=
=
2) Interest and dividends received.
Interest and dividends received =
=
Net sales {+Decrease in AR or –Increase in AR}
2,950,000 + 120,000
3,070,000
Interest revenue + Dividends income {+Decrease in
relating Receivable or –Increase in relating Receivable}
70,000 + 104,000 – 2,000
172,000
3) Cash paid to suppliers and employees.
Cash paid to suppliers and employees =
=
=
A. Cash payment for purchases
=
B. Cash payment for employees
=
=
=
=
=
4) Interest and income taxes paid.
Interest and income taxes paid =
=
=
Cash flows from operating activities:
A+B
1,577,000 + 899,000
2,476,000
COGS {+Increase in inventory –Decrease in
inventory}{+Decrease in AP or –Increase in
AP}
1,550,000 + 35,000 – 8,000
1,577,000
Expenses {-Depreciation and other non-cash
expenses} {+Increase in related prepayments or
–Decrease in related prepayments} {-Increase in
related accrued liabilities or +Decrease in
related accrued liabilities}
980,000 – 115,000 + 29,000
899,000
Interest expense + Income taxes expense {+Decrease in
related accrued liabilities or –Increase in related
accrued liabilities}
185,000 + 110,000 + 4,000
299,000
1. Cash received from customers…………………..…………..
2. Interest and dividends received………..……………………
Cash provided by operating activities…………….
3. Cash paid to suppliers and employees………….……….
4. Interest and income taxes paid…………………..………….
Cash disbursed for operating activities………….
Net cash flows from operating activities…………………….
$ 3,070,000
172,000
$ 3,242,000
(2,474,000)
(299,000)
(2,773,000)
$ 469,000