Based on the Following Income Statement and Balance Sheet for Montego

question 8

Essay

Based on the following income statement and balance sheet for Montego Bay Corporation, determine the cash flows from operating activities using the direct method.
$\begin{array}{c}\text { MONTEGO BAY CORPORATION } \\\text {Income Statement } \\\text { For Year Ended December 31, 2013 } \\\begin{array}{|l|r|r|}\hline \text { Sales } & & \$ 504,000 \\\hline \text { Cost of goods sold } & 327,600 & \\\hline \text { Depreciation } & 42,000 & \\\hline \text { Other operating expenses } & 125,500 & (495,100) \\\hline \text { Other gains (losses): } & & \\\hline \quad \text { Gain on sale of equipment } & & 7,200 \\\hline \text { Income before taxes } & & 16,100 \\\hline \text { Income tax expense } & & (4,800) \\\hline \text { Net income } & & \$ 11,300\\\hline\end{array}\end{array}$

$\begin{array}{c} \text { MONTEGO BAY CORPORATION } \\ \text { Balance Sheets } \\ \text {At December 31 } \\\begin{array}{|l|r|r|}\hline &2013&2012\\\hline \text { Cash } & \$ 64,650 & \$ 55,800 \\\hline \text { Accounts receivable } & 21,000 & 29,000 \\\hline \text { Inventory } & 58,000 & 52,100 \\\hline \text { Equipment } & 240,000 & 222,000 \\\hline \text { Accumulated depreciation } & (106,000) & (96,000) \\\hline \text { Total assets } & \underline {\$ 277,650 }& \underline {\$ 262,900} \\\hline & & \\\hline \text { Liabilities: } & & \\\hline \text { Accounts payable } & \$ 28,400 & \$ 23,700 \\\hline \text { Income taxes payable } & 1,050 & \underline{1,200} \\\hline \text { Total liabilities } & \$ 29,450 & \$ 24,900 \\\hline \text { Equity: } & & \\\hline \text { Common stock } & \$ 106,000 & \$ 106,000 \\\hline \text { CC in excess } & 18,000 & 18,000 \\\hline \text { Retained earnings } & 124,200 & 114,000 \\\hline \text { Total equity } & \$ 248,200 & \$ 238,000 \\\hline \text { Total liabilities and equity } & \underline {\$ 277,650} & \underline {\$ 262,900} \\\hline\end{array}\end{array}$

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Definitions:

Discriminative Stimulus

A stimulus in the presence of which a particular response is reinforced, guiding the organism to respond accordingly.

Salivary Conditioning

A classical conditioning process where an automatic, instinctive response becomes associated with a new stimulus through repeated exposure.

Presentation of Food

The art and technique of arranging food to enhance its aesthetic appeal and overall dining experience.

Salivation

The production and release of saliva in the mouth, often in response to the sight, smell, or taste of food.