How much cash is paid for operating expenses


Response to the following:

Refer to the data in problem.

1. How much cash is paid to acquire merchandise inventory during year 2011?

2. How much cash is paid for operating expenses during year 2011?

Problem:

Use the indirect method to prepare the cash provided or used from operating activities section only of the statement of cash flows for this company.

ORWELL, INC.

           Income Statement

For Year Ended December 31, 2011

Sales . . . . . . . . . . . . . . . . . . . . . . . . . .                        $468,000

Cost of goods sold . . . . . . . . . . . . . .                           312,000

Gross profit . . . . . . . . . . . . . . . . . . . .                         156,000

Operating expenses

Depreciation expense . . . . . . . . . $38,600

Other expenses . . . . . . . . . . . . . . 57,000                     95,600

Income before taxes . . . . . . . . . . . . .                            60,400

Income taxes expense . . . . . . . . . . .                             24,600

Net income . . . . . . . . . . . . . . . . . . . . $ 35,800

ORWELL, INC.
Comparative Balance Sheets
December 31, 2011

Assets

2011

2010

 

 

Cash ............................................................

$ 95,800

$ 25,000

Accounts receivable, net ....................

42,000

52,000

Inventory ........................................

86,800

96,800

Prepaid expenses ..............................

6,400

5,200

Furniture .........................................

110,000

120,000

Accum. depreciation-Furniture ...........

(18,000)

(10,000)

Total assets .....................................

$323,000

$289,000

Liabilities and Equity

 

 

Accounts payable ..............................

$ 16,000

$ 22,000

Wages payable .................................

10,000

6,000

Income taxes payable ........................

2,400

3,600

Notes payable (long-term) ..................

30,000

70,000

Common stock, $5 par value ...............

230,000

180,000

Retained earnings .............................

34,600

7,400

Total liabilities and equity ...................

$323,000

$289,000

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Accounting Basics: How much cash is paid for operating expenses
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