# Question & Answer: Determining Selected Amounts for Cash Flows from Operating Activities-Direct Method Selected data taken from the a…..

Determining Selected Amounts for Cash Flows from Operating Activities-Direct Method Selected data taken from the accounting records of Lachgar Inc. for the current year ended December 31 are as follows: During the current year, the cost of merchandise sold was \$423,300, and the operating expenses other than depreciation were \$75,400. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows. a. Determine the amount reported on the statement of cash flows for cash payments for merchandise. \$427,590 b. Determine the amount reported on the statement of cash flows for cash payments for operating expenses. \$ 423,800

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Solution

A

 Cost of merchandise sold \$423,300 Add decrease in account payable (45690-41400) \$4,290 \$427,590 Deduct decrease in inventory (83080-76430) \$6,650 Cash payment for merchandise \$420,940

B.

 Operating expenses other than depreciation \$75,400 Add decrease in accrued expenses(5940-5440) \$500 \$75,900 Less decrease in prepaid expenses(3770-3140) \$630 Cash payments for operating expenses \$75,270