Concept #1: Direct Method: Cash Received from Customers

Concept #2: Direct Method: Cash Paid to Suppliers

Concept #3: Direct Method: Cash Paid for Operating Expenses

Practice: ABC Company is preparing its Statement of Cash Flows using the direct method. The accountant gathered the following information: cash paid to suppliers was $140,000; sales revenue was $350,000; Accounts Receivable increased by $10,000 during the year; depreciation expense was $15,000; operating expenses totaled $80,000; Prepaid Expenses decreased by $8,000 during the year; and a loss on the disposal of plant assets equaled $6,000. What is the cash flow provided by operating activities?

Practice: During the year, cash paid to suppliers was $340,000. Cash received from customers was $580,000. Cash paid for operating expenses totaled $64,000. Depreciation expense totaled $16,000. The company also purchased equipment for $35,000. Using the direct method, what is the cash provided by operating activities?

Additional Problems
Which of the following would not appear on a Statement of Cash Flows prepared using the direct method? a. Payments to a supplier b. Collections from customers c. Proceeds from the issuance of common stock d. Cost of goods sold
Which of the following would  not appear on a Statement of Cash Flows prepared using the direct method? a. Payments to a supplier b. Collections from customers c. Proceeds from the issuance of common stock d. Cost of goods sold
The following selected account balances were taken from Buckeye Company's general ledger at January 1, 2005 and December 31, 2005: Calculate the amount of  salaries expense reported in Buckeye Company's 2005 income statement.
The following selected account balances were taken from Buckeye Company's general ledger at January 1, 2005 and December 31, 2005: Calculate the amount of cash collected from customers during 2005.
The cost of goods sold during the year was $165,000. Merchandise inventory decreased by $6,000 during the year and accounts payable decreased by $3,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total a. $168,000. b. $162,000. c. $156,000. d. $174,000
Bebe Company uses the direct method in determining net cash provided by operating activities, During the year, operating expenses were $260,000, prepaid expenses increased $20,000, and accrued expenses payable increased $30,000. Cash payments for operating expenses were a. $210,000. b. $310,000. c. $270,000. d. $250,000.
A company reports its cost of goods sold as $15.0 billion in 2009. It has $2.9 billion in inventory and reports accounts payable at $1.2 billion at the end of 2009. At the end of 2008 ending inventory was reported at $3.1 billion and accounts payable was $1.4 billion. How much cash was paid to suppliers for 2009? A. $14.8 billion B. $15.0 billion C. $15.2 billion D. $15.7 billion
Which of the following activities is an operating activity? a. Issuing stock for a building b. Redemption of bonds at maturity c. Collecting the interest on an investment d. Purchasing the common stock of another corporation as an investment e. Issuing bonds for an amount greater than the bond par value