Exam 17: The Direct Method of Determining the Net Cash Provided by Operating Activities

Evita Corporation prepares its statement of cash flows using the indirect method. Evita's statement showed "Net cash provided by operating activities" of $46,000. Under the direct method, this number would have been:

During the year the balance in the Prepaid Expenses account increased by $6,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

The change in each of Kendall Corporation's balance sheet accounts last year follows: Kendall Corporation's income statement for the year was: There were no sales or retirements of property, plant, and equipment and no dividends paid during the year. The company pays no income taxes and it did not purchase any long-term investments, issue any bonds payable, or repurchase any of its own common stock. The net cash provided by operating activities on the statement of cash flows is determined using the direct method. The selling and administrative expense adjusted to a cash basis would be:

The changes in Northrup Corporation's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $28,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities. On the statement of cash flows, the sales adjusted to a cash basis would be:

Last year Cumberland Corporation reported a cost of goods sold of $120,000. Inventories increased by $35,000 during the year, and accounts payable increased by $20,000. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:

Van Beeber Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities. On the statement of cash flows, the selling and administrative expense adjusted to a cash basis would be:

The most recent balance sheet and income statement of Oldaker Corporation appear below: The company paid a cash dividend of $42 and it did not dispose of any property, plant, and equipment. The company did not retire any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) operating activities for the year was:

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, a decrease in prepaid expenses would be added to selling and administrative expenses to convert selling and administrative expenses to a cash basis.

Shimko Corporation's most recent comparative balance sheet and income statement appear below: The company paid a cash dividend of $19 and it did not dispose of any property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) investing activities for the year was:

The change in each of Kendall Corporation's balance sheet accounts last year follows: Kendall Corporation's income statement for the year was: There were no sales or retirements of property, plant, and equipment and no dividends paid during the year. The company pays no income taxes and it did not purchase any long-term investments, issue any bonds payable, or repurchase any of its own common stock. The net cash provided by operating activities on the statement of cash flows is determined using the direct method. The net cash provided (used) by investing activities would be:

LFM Corporation reported cost of goods sold on its income statement of $15,000. The following account balances appeared on the company's comparative balance sheet for the same year: The company uses the direct method to determine the net cash provided by operating activities. The cost of goods sold, adjusted to a cash basis, on the company's statement of cash flows for the year would be:

Crossland Corporation reported sales on its income statement of $435,000. On the statement of cash flows, which used the direct method, sales adjusted to a cash basis were $455,000. Crossland Corporation reported the following account balances on its balance sheet for the year: Based on this information, the beginning balance in accounts receivable was:

Cridberg Corporation's selling and administrative expenses for last year totaled $260,000. During the year the company's prepaid expense account balance increased by $18,000 and accrued liabilities decreased by $12,000. Depreciation for the year was $25,000. Based on this information, selling and administrative expenses adjusted to a cash basis under the direct method on the statement of cash flows would be:

The change in each of Kendall Corporation's balance sheet accounts last year follows: Kendall Corporation's income statement for the year was: There were no sales or retirements of property, plant, and equipment and no dividends paid during the year. The company pays no income taxes and it did not purchase any long-term investments, issue any bonds payable, or repurchase any of its own common stock. The net cash provided by operating activities on the statement of cash flows is determined using the direct method. Using the direct method, sales adjusted to a cash basis would be:

The ending balance of accounts receivable was $69,000. Sales, adjusted to a cash basis using the direct method on the statement of cash flows, were $354,000. Sales reported on the income statement were $378,000. Based on this information, the beginning balance in accounts receivable was:

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in accounts receivable would be added to sales revenue to convert revenue to a cash basis.