Use the Following Income Statement and Information About Selected Current

question 4

Essay

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.
$\begin{array}{c} \text { PETERS COMPANY } \\ \text { Income Statement } \\ \text { For Year Ended December 31, 2013 } \\\begin{array}{|l|r|r|}\hline \text { Sales } & & \$ 180,000 \\\hline \text { Cost of goods sold } & & 104,000 \\\hline \text { Gross profit from sales } & & \$ 76,000 \\\hline \text { Operating expenses: } & & \\\hline \text { Salaries and wages expense } & \$ 25,000 & \\\hline \text { Depreciation expense } & 5,000 & \\\hline \text { Rent expense } & 7,200 & \\\hline \text { Interest expense } & 1,900 & 39,100 \\\hline \text { Income from operations } & & \$ 36,900 \\\hline \text { Gain on sale of land } & & 2,000 \\\hline \text { Net income } & & 38,900 \\\hline\end{array}\end{array}$
Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad{\text { Balance }} \\\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & \text { Dec. } 31,2013 & \text { Dec, } 31,2012 \\\hline \text { Merchandise inventory } & \$ 27,600 & \$ 24,000 \\\hline \text { Prepaid rent } & 18,200 & 20,000 \\\hline \text { Accounts payable } & 550 & 400 \\\hline \text { Salaries and wages payable } & 27,100 & 31,000 \\\hline \text { Interest payable } & 10,400 & 9,000 \\\hline\end{array}\end{array}$

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Definitions:

Customers Served

The number of unique individuals or entities that receive or utilize the services provided by a company or organization.

Planning Budget

A budget created before the start of the budget period, outlining expected revenues, expenses, and other financial activities.

Other Expenses

Costs that do not fit into the standard categories of operating expenses, often incidental or infrequent.

Spending Variance

The difference between the actual amount spent and the budgeted or planned amount for a specific period.