Help! I'm doing a online accounting test!!! Look at the details for the question?

Question

Selected financial statement information is reported below for Femer Corporation for the year ended December 31, 2007.

Sales $500,000

Cost of goods sold 240,000

Depreciation expense 30,000

Other Operating expenses 106,000

Net income $124,000

Dividends paid $50,000


Account Balances Dec. 31, 2007
Dec. 31, 2006

Cash $16,000
$28,000

Accounts Receivable 40,000
30,000

Inventory 28,000
36,000

Wages payable 8,000
10,000

Using the above data, determine the cash flow from operating activities for the year using the direct method.

Answer 1

Cash receipts from customers is obtained by:
AR opening bal 30,000
add Sales 500,000
less AR closing bal (40,000)
Equals 490,000

Cash paid to suppliers & employees is obtained by:
Wages payable opening bal 10,000
add Purchases of gds & svcs {240k + 106k} 346,000
less closing stocks (36,000)
add opening stocks 28,000
less wages payable closing bal (8,000)
Equals 340,000

So:
Cash receipts from customers 490,000
Cash paid to suppliers & employees (340,000)
Cash generated from opns 150,000

Pls note depreciation is a non-cash item and not treated as purchases. Also dividends is a cash outflow in financing activities and doesn't affect cash generated from opns.