Question

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the direct method.


PETERS COMPANY Income Statement For Year Ended December 31, 2013
Sales $180,000
Cost of goods sold 104,000
Gross profit from sales $ 76,000
Operating expenses:
Salaries and wages expense $25,000
Depreciation expense 5,000
Rent expense 7,200
Interest expense 1,900 39,100
Income from operations $36,900
Gain on sale of land 2,000
Net income 38,900

Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:


Balance
Dec. 31, 2013 Dec, 31, 2012
Accounts receivable $27,600 $24,000
Merchandise inventory 18,200 20,000
Prepaid rent 550 400
Accounts payable 27,100 31,000
Salaries and wages payable 10,400 9,000
Interest payable 300 250

Answer

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