Reference no: EM132051663

Question - Computation of Operating Activities - Using the Indirect Method

Situation A: Annie Lennox Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations, 2014. Accounts Receivable and accounts payable at year end were $71,000 and $29,000, respectively. Assume that the accounts payable related to operating expenses (Ignore Taxes).

Instructions: Using the Indirect method, compute net cash provided by operating activities.

Situation B: The income statement for Blues Traveler Co. Shows cost of goods sold $310,000 and operating expenses (exclusive of depreciation) $230,000. The comparative balance sheet for the year shows that inventory increased $26,000, prepaid expenses decreased $8,000, accounts payable (related to merchandise) decreased $17,000, and accrued expenses payable decreased $11,000.

Instructions: Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.