Gilmore Company Uses the Direct Method to Prepare Its Statement

question 179

Multiple Choice

Gilmore Company uses the direct method to prepare its statement of cash flows. Refer to the following financial statement information for the year ended December 31, 2018: $\begin{array}{c} \text { Gilmore Company}\\ \text { Comparative Balance Sheet}\\ \text { December 31,2018 and 2017}\\\begin{array}{|l|c|c|c|}\hline & 2018 & 2017 & \begin{array}{r}\text { Increase } \\\text { (Decrease } \\\end{array} \\\hline \text { Cash } & \$ 34,600 & \$ 16,900 & \$ 17,700 \\\hline \text { Accounts Receivable } & 27,000 & 31,700 & (4700) \\\hline \text { Merchandise Inventory } & 56,400 & 29,400 & 27,000 \\\hline \text { PP\&E, net } & \underline{126,000} & 92,000 & 34,000 \\\hline \text { Total Assets } & \$ 244,000 & \$ 170,000 & \$ 74,000 \\\hline \text { Accounts Payable } & 3200 & 12,200 & \$(4,000 \\\hline \text { Accrued Liabilities } & 6100 & 2100 & 4,000 \\\hline \text { Long-term Notes Payable } & 71,700 & 30,700 & \$(9000) \\\hline \text { Total Liabilities } & \$ 86,000 & \$ 95,000 & \$(9,000 \\\hline \text { Common Stock } & \$ 55,000 & \$ 3,000 & \$ 52,000 \\\hline \text { Retained Earnings } & 115,000 & 78,000 & 37,000 \\\hline \text { Treasury Stock } & (12,000) & (6,000) & (6,000 \\\hline \text { Total Stockholders' Equity } & \$ 158,000 & \$ 75,000 & \$ 83,000 \\\hline \text { Total Liabilities and Stockholders' Equity } & \$ 244.000 & \$ 170,000 & \$ 74,000 \\\hline\end{array}\end{array}$
$\begin{array}{c}\text {Gilmore Company}\\\text {Income Statement}\\\text {December 31,2018}\\\begin{array}{|l|l|l|}\hline \text { Sales Revenue } & \$ 289,800 & \\\hline \text { Interest Revenue } & 2500 & \\\hline \text { Gain on Sale of Plant Assets } & \underline{6,000} & \\\hline \text { Total Revenues and Gains } & &\$298,300 \\\hline \text { Cost of Goods Sold } & 147,900 & \\\hline \text { Salaries and Wages Expense } & 46,200& \\\hline \text { Depreciation Expense - Plant Assets } & 16,000 & \\\hline \text { Other Operating Expense } & 24,900 & \\\hline \text { Interest Expense } &3,500 & \\\hline \text { Income Tax Expense } &\underline{7,800} & \\\hline \text { Total Expenses } & &\underline{ 246,300} \\\hline \text { Net Income } & &\underline{\$ 52,000} \\\hline\end{array}\end{array}$ Use the direct method, to compute the net cash provided by operating activities. (Accrued Liabilities relate to other operating expense.)

• A) $(55,700)
• B) $39,700
• C) $(39,700)
• D) $55,700

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