The following information was made available from the income statement and balance sheet of Lauren Company.
Item 12/31/10 12/31/09
Accounts Receivable $53,400 58,600
Accounts Payable 35,600 32,700
Merchandise Inventory 85,000 79,000
Sales (2010) 243,000
Interest Revenue (2010) 5,600
Dividend Revenue (2010) 1,200
Tax Expense (2010) 12,300
Salaries Expense (2010) 28,000
COGS (2010) 65,000
Interest Expense (2010) 3,600
Operating Expenses 28,500
Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.
Can someone please help me
To complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010, we need to calculate the cash inflows and outflows from the company's operating activities.
Here's how you can calculate the cash flows using the direct method:
1. Start with the net income: Find the net income for the year from the income statement. In this case, the net income is not provided, so we'll need to calculate it. We can use the following formula:
Net Income = Sales - COGS - Operating Expenses - Tax Expense - Interest Expense
Net Income = $243,000 - $65,000 - $28,500 - $12,300 - $3,600 = $133,600
2. Calculate the cash received from customers: Determine the change in accounts receivable from the previous year to the current year. In this case:
Cash received from customers = Accounts Receivable (12/31/10) - Accounts Receivable (12/31/09)
= $53,400 - $58,600
= -$5,200 (since it is a decrease in accounts receivable)
3. Calculate the cash paid to suppliers: Determine the change in accounts payable from the previous year to the current year. In this case:
Cash paid to suppliers = Accounts Payable (12/31/10) - Accounts Payable (12/31/09)
= $35,600 - $32,700
= $2,900
4. Calculate the cash paid for operating expenses: This information is already provided as the Salaries Expense ($28,000). It represents the cash paid for operating expenses.
5. Calculate the net cash provided by operating activities: Add the cash received from customers (step 2) and subtract the cash paid to suppliers (step 3) and cash paid for operating expenses (step 4). In this case:
Net cash provided by operating activities = (Cash received from customers - Cash paid to suppliers - Cash paid for operating expenses) + Other operating revenues
= (-$5,200 - $2,900 - $28,000) + $0
= -$36,100
Therefore, the cash flow from operating activities using the direct method for Lauren Company for the year ended December 31, 2010, is -$36,100.