Sentrino Company Uses the Direct Method for Its Statement of Cash

question 46

Essay

Sentrino Company uses the direct method for its statement of cash flow. Assume Accrued Liabilities relate to Operating Expenses. It reports the following information regarding the year ending December 31, 2014:
$\begin{array}{c}\text { Incone Statement}\\\begin{array}{lll}\text { Sales Revenue}\\\text { Cost of Goods Sold}\\\text { Operating expenses:}\\\text { Net Income}\end{array}\begin{array}{l}\$ 312,000 \\247,000 \\\underline{2,500}\\\underline{\underline{{\$ 32,500}}} \end{array}\end{array}$

$\begin{array}{c}\text { Partial Balance Sheet }\\\begin{array}{lll}\\\text {Accounts Receivable (net)}\\\text {Inventories}\\\text {Accrued Liabilities}\\\text {Accounts Payable (inventory)} \end{array}\begin{array}{l}2013 \\\$ 15,600 \\28,600 \\3,900 \\9,100 \end{array}\begin{array}{l}2014 \\\$ 19,500 \\23,400 \\1,560 \\15,600 \end{array}\end{array}$
Assume that there were no sales of long-term assets, no Interest Revenue, and no expenses other than the expenses shown above. Also, assume that Accounts Payable is for purchases of inventory only. Prepare the operating activities section of the statement of cash flows.

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Definitions:

CEO Pay

The compensation package awarded to the chief executive officer of a corporation, which may include salary, bonuses, stock options, and other benefits.

Competitive Labor Market

A market in which workers compete for jobs and employers compete for workers, resulting in the equilibrium wage rate being determined.

Principal-Agent Problem

A conflict in priorities between a person or group (the agent) making decisions on behalf of another person or group (the principal).

Efficiency Wages

Efficiency wages are higher than market wages paid by employers to increase productivity, worker loyalty, and morale.