Knowee
Questions
Features
Study Tools

wellington Ski Supplies Pty Ltd completed its first year of operations on 30 June 2022. Its incomestatement showed that the business had revenues of $170 000 and operating expenses of $80 000, including Bad debt expenses of $1000. Accounts Receivable and Accounts Payable at year-end were $ 43,000 and $ 33,000, respectively. Assume that accounts payable are related to operating expenses. Ignore income tax. The Allowance for Doubtful Debts is $1000. There has been no direct write-off of accounts receivable.RequiredCalculate net cash provided by operating activities using the direct method

Question

wellington Ski Supplies Pty Ltd completed its first year of operations on 30 June 2022. Its incomestatement showed that the business had revenues of 170000andoperatingexpensesof170 000 and operating expenses of 80 000, including Bad debt expenses of 1000.AccountsReceivableandAccountsPayableatyear−endwere1000. Accounts Receivable and Accounts Payable at year-end were 43,000 and 33,000,respectively.Assumethataccountspayablearerelatedtooperatingexpenses.Ignoreincometax.TheAllowanceforDoubtfulDebtsis 33,000, respectively. Assume that accounts payable are related to operating expenses. Ignore income tax. The Allowance for Doubtful Debts is 1000. There has been no direct write-off of accounts receivable.RequiredCalculate net cash provided by operating activities using the direct method

...expand
🧐 Not the exact question you are looking for?Go ask a question

Solution

To calculate the net cash provided by operating activities using the direct method, we need to adjust the revenues and expenses from the accrual basis of accounting to the cash basis. Here are the steps:

  1. Start with the revenues of 170,000.Sincewe′renotgivenanyinformationaboutchangesinunearnedrevenue,we′llassumeallrevenueswerereceivedincash.So,cashreceivedfromcustomersis170,000. Since we're not given any information about changes in unearned revenue, we'll assume all revenues were received in cash. So, cash received from customers is 170,000.

  2. Next, calculate cash paid for operating expenses. The total operating expenses were 80,000,whichincludes80,000, which includes 1,000 of bad debt expense. Since bad debt expense is a non-cash expense, we need to add it back. So, the adjusted operating expenses are 80,000−80,000 - 1,000 = $79,000.

  3. However, we also need to consider the change in accounts payable, which are related to operating expenses. Accounts payable increased by 33,000duringtheyear.Thismeansthatsomeoftheexpensesincurredwerenotyetpaidincash.So,weneedtoaddthis33,000 during the year. This means that some of the expenses incurred were not yet paid in cash. So, we need to add this 33,000 to the adjusted operating expenses. So, cash paid for operating expenses is 79,000+79,000 + 33,000 = $112,000.

  4. Finally, subtract the cash paid for operating expenses from the cash received from customers to get the net cash provided by operating activities. So, 170,000−170,000 - 112,000 = $58,000.

Therefore, the net cash provided by operating activities is $58,000.

This problem has been solved

Similar Questions

Bhekisizwe (Pty) Ltd is a small business corporation based in Umlazi. The company recently acquired a machine that is used in the process of manufacture and started using it immediately. How much of the cost of the machine can the company claim as a capital allowance in the first year of assessment that the asset is used?

Tshiawelo Pty Limited has provided you with the following extract from the financial records for the financial year ended 31 December 2023 RCost of sales2 400 000Gross profit40%Operating expenses800 000Interest expense200 000Income tax expense30%Inventories 800 000Issued capital2 000 000Trade payables500 000Trade receivables600 000Cash and other equivalents200 000Short-term borrowings500 000Long-term borrowings2 000 000Property Plant and equipment1 000 000Required:Calculate the following ratios by choosing the correct answer from the options provided:Revenue from sales Blank 1 Net profit margin Blank 2Current ratio Blank 3Quick ratio Blank 4Debtors’ collection period Blank 5 Return on assets (ROA) Blank 6Days’ sales inventory held Blank 7Times interest earned ratio Blank 8

The Alpine House, Incorporated, is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:  AmountSales $ 1,050,000Selling price per pair of skis $ 420Variable selling expense per pair of skis $ 47Variable administrative expense per pair of skis $ 16Total fixed selling expense $ 135,000Total fixed administrative expense $ 125,000Beginning merchandise inventory $ 80,000Ending merchandise inventory $ 100,000Merchandise purchases $ 295,000Required:Prepare a traditional income statement for the quarter ended March 31.Prepare a contribution format income statement for the quarter ended March 31.What was the contribution margin per unit?

In its first year of operations, Harrington Pty Ltd earned $573,000 in services revenue, $217,740 of which was on account and still outstanding at the end of the reporting period. The remaining $355,260 was received in cash from customers. The company paid expenses of $343,800 in cash. Included in the $343,800 paid is $23,100 for insurance coverage that will not be used until the second year. Additionally, there is $37,000 still owing on account at the end of the reporting period.Important:Enter amounts without "$" sign or any thousands separators, i.e. $46,000 should be written as 46000. For cash-based or accrual-based loss, enter the minus (-) sign in front of the amount, i.e. -45. For expenses, enter amounts without the minus (-) sign.Required:a. Apply cash accounting to calculate the first year profit of Harrington Pty Ltd.Income = $Answer 1 Question 1Expenses = $Answer 2 Question 1Cash-based profit = $Answer 3 Question 1

Titan wholesale Ltd Trial Balance December 31, 2022 Particulars Debit Credit Tk Tk Cash 20000 Investment 100000 Account Receivable 50000 Opening Inventory 15000 Office Supplies 9000 Office Equipment 60000 Prepaid Rent 4000 Notes Payable 34000 Accounts Payable 90000 Titan Capital 70000 Titan Drawings 3500 Sales 200,000 Purchase 100000 Salary Expense 18000 Rent Expense 9000 Insurance Expense 4500 Freight Out 1000 Total 394000 394000 Adjustment Data: 1. Merchandise inventory actually on hand at 31st December Tk 30000 2. Rent were expired Tk 2500 3. Depreciation on office Equipment @ 10% per annum 4. Outstanding salary of Tk 2000 for the period 5. Office Supplies on hand Tk 4000. Create an adjusting journal and trial balance

1/1

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.