Reference no: EM132324765

How to calculate the operating expenses in cash flow for operating activities.

Q. Statement of cash flows for 2017 using the direct method for operating activities.

Statement of profit or loss for the year ending 30 June 2017

Sales   $89,000

less cost of sales  (57,000)

Gross profit 32,000

less expenses 

Depreciation expense $6,500

Advertising expense 3,200

Salaries expense 12,000

(21,700)

Loss on sale of land (2,500)

Profit before tax 7,800

Income tax expense 2,600

Net income 5,200

Statement of financial position as at 30 June 2017

                                       2017                  2016

Cash                                $12,000             $9,500

Accounts receivable            22,000              18,400

Inventory                          25,400               20,500

Prepaid advertising              10,000               8,600

Land                                 120,000              80,000

Equipment                          190,000             130,000

Accumulated depreciation      (70,000)            (63,500)

Total assets                        309,400             203,500

Accounts payable                 15,300               12,100

Salaries payable                    14,000               16,400

Income tax payable                1,200                 700

Total liabilities                      30,500                  29,200

Ordinary shares                    200,000              100,000

Retained earnings                 78,900               74,300

Total equity                         278,900              174,300

Total liabilities and equity       309,400              203,500