Computation of Operating Cash Flows
the Financial Statements of Custom

question 161

Essay

Computation of operating cash flows
The financial statements of Custom Corporation provide the following information for the current year:
Using this information, compute for the current year:
$\begin{array}{lrr}&\text { End of } & \text { Beginning } \\&\text { Year } & \text { of Year } \\\text { Accounts receivable } & \$ 201,000 & \$ 221,000 \\\text { Inventory } & \$ 249,000 & \$ 233,000 \\\text { Short-term prepayments } & \$ 12,000 & \$ 9,500 \\\text { Accounts payable (for merchandise) } & \$ 177,000 & \$ 170,000 \\\text { Accrued operating expenses payable } & \$ 25,500 & \$ 33,200 \\\text { Accrued income taxes payable } & \$ 12,600 & \$ 15,500 \\\text { Net sales } & \$ 801,000 & \\\text { Cost of goods sold } & \$ 465,000 & \\\text { Operating expenses (including depreciation of } \$ 40,000) & \$ 300,000 & \\\text { Income taxes expense } & \$ 39,000 &\end{array}$ $\begin{array}{|l|l|}\hline \text { (a) Cash received from customers}&\$\_\_\_\_ \\\hline \text {(b) Cash payments for purchases of merchandise }&\$\_\_\_\_ \\\hline \text { (c) Cash payments for operating expenses}&\$\_\_\_\_ \\\hline \text { (d) Income taxes paid}&\$\_\_\_\_ \\\hline \end{array}$

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Definitions:

Net 30 Credit Policy

A common trade credit that allows buyers 30 days to pay the invoice in full after receiving goods or services.

Monthly Interest Rate

The percentage of interest that is charged or earned on an investment or loan on a monthly basis.

Default Rate

The rate at which borrowers fail to make required payments on their loans or credit obligations.

Monthly Interest Rate

The percentage of interest calculated on a monthly basis typically used in loans and financial products.