P1. Cash Flows from Operating Activities: Direct Method

Tanucci Clothing Store’s income statement follows.

 

Tanucci Clothing Store Income Statement

For the Year Ended June 30, 2014

Net sales                                                                                                                          $4,900,000

Cost of goods sold:

Beginning inventory                                                         $1,240,000

Net cost of purchases                                                          3,040,000

Goods available for sale                                                   $4,280,000

Ending inventory                                                                 1,400,000

Cost of goods sold                                                                                                     2,880,000

Gross margin                                                                                                                  $2,020,000

Operating expenses:

Sales and administrative salaries expense                      $1,112,000

Other sales and administrative expenses                            624,000

Total operating expenses                                                                                          1,736,000

Income before income taxes                                                                                         $   284,000

Income taxes                                                                                                                          78,000

Net income                                                                                                                      $   206,000

 

 

 

 

 

 

 

 

 

 

 

 

 

✔ 1: Total  operating activities:

$548,000 inflows

✔ 1: Total financing activities:

$260,000 outflows

 

Additional information: (a) other sales and administrative expenses include depreciation expense of $104,000 and amortization expense of $36,000; (b) accrued liabilities for salaries were $24,000 less than the previous year, and prepaid expenses were $40,000 more than the previous year; and (c) during the year accounts receivable (net) increased by $288,000, accounts payable increased by $228,000, and income taxes payable decreased by $14,400.

REquIRED

Using the direct method, prepare a schedule of cash flows from operating activities.