Mamie K.Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section.Mamie's activities for the year ended December 31,2018 included the following:
• Income tax expense for the year was $36,000.
• Sales for the year were $730,000.
• Accounts payable decreased $20,000 in 2018.
• Selling and administration expenses for the year totaled $140,000.
• Accounts receivable increased $6,000 in 2018.
• Mamie's cost of goods sold in 2018 was $315,000.
• Mamie's inventory decreased $13,000 during the year.
• Interest expense for the period was $17,000.The interest payable account increased $5,000.
• Dividends were not declared during the year; however,the dividends payable account decreased $2,000.
• Sold an available-for-sale investment for $45,000.The book value was $52,000.
• Depreciation expense for the year was $19,000.
Required:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b.Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

Question

Quizplus · Accepted Answer

The Answer of Mamie K.Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section.Mamie's activities for the year ended December 31,2018 included the following:
• Income tax expense for the year was $36,000.
• Sales for the year were $730,000.
• Accounts payable decreased $20,000 in 2018.
• Selling and administration expenses for the year totaled $140,000.
• Accounts receivable increased $6,000 in 2018.
• Mamie's cost of goods sold in 2018 was $315,000.
• Mamie's inventory decreased $13,000 during the year.
• Interest expense for the period was $17,000.The interest payable account increased $5,000.
• Dividends were not declared during the year; however,the dividends payable account decreased $2,000.
• Sold an available-for-sale investment for $45,000.The book value was $52,000.
• Depreciation expense for the year was $19,000.
Required:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b.Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

Mamie KLtd