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  • This topic has 2 replies, 2 voices, and was last updated 3 months ago by John Moffat.
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  • Author
    Posts
  • June 15, 2023 at 3:32 pm #687083
    Funn
    Participant
    • Topics: 2
    • Replies: 1
    • ☆

    Closing balance
    $ Opening balance
    $
    Current assets

    Inventory

    30,000

    25,000

    Trade receivables

    20,000

    26,000

    Current liabilities

    Trade payables

    14,000

    11,000

    Additional informationDuring the year, depreciation of $50,000 and amortisation of $40,000 was charged to the statement of profit or loss.

    Cash receipts from customers, including cash sales, were $800,000. Cash paid to suppliers and employees was $626,000.

    Interest paid was $12,000 and taxation paid was $13,000.

    Required:
    (a) Prepare the operating activities section of the statement of cash flows using the direct method.
    (b) Prepare the operating activities section of the statement of cash flows using the indirect method.

    Solution (a) direct method
    The direct method is relatively straightforward in that all the data are cash flows so it is a case of listing the receipts as positive and the payments as negative.

    Cash flows from operating activities – Direct method

    $

    Cash receipts from customers

    800,000

    *Cash paid to suppliers and employees

    (400,000)*

    Cash generated from operations

    174,000

    Interest paid

    (12,000)

    Taxation paid

    (13,000)

    Net cash from operating activities 149,000

    I am not able to under from where there are puting 400000 in cash paid to suppliers and employees?
    Please explain this it is an example of f3 article.

    June 15, 2023 at 3:33 pm #687084
    Funn
    Participant
    • Topics: 2
    • Replies: 1
    • ☆

    Please explain this it’s an request

    June 15, 2023 at 5:42 pm #687093
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53169
    • ☆☆☆☆☆

    It should be $626,000 and not $400,000 and it is a typing mistake.

    If you check the arithmetic you will see that 800,000 – 400,000 does not equal 174,000.
    It is 800,000 – 626,000 that is equal to 174,000, so everything else in the statement is correct.

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