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Portions of the financial statements for Myriad Products are provided below.
MYRIAD PRODUCTS COMPANY
Income Statement
For the Year Ended December 31, 2018
($ in millions)
Sales $ 720 Cost of goods sold 252 Gross margin 468 Salaries expense $ 105 Depreciation expense 80 Patent amortization expense 5 Interest expense 20 Loss on sale of land 4 214 Income before taxes 254 Income tax expense 127 Net Income $ 127 MYRIAD PRODUCTS COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2018 and 2017
($ in millions)
Year 2018 2017 Change
Cash $ 120 $ 112 $ 8 Accounts receivable 232 250 (18 )
Inventory 446 462 (16 )
Accounts payable 170 158 12 Salaries payable 86 98 (12 )
Interest payable 43 32 11 Income taxes payable 33 22 11 Required:
Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Respuesta :

Cash Flow from Operating Activities (Direct Method)

Cash receipts from customers (Refer Note 1) $738

Cash payments to merchandise (Note 2) -$224

Cash payment for Salaries expense (refer note 4) -$117

Income Taxes paid (Refer note 6)-$116

Net Cash Flow from Operating Activities   =  $281

Note --- It is assumed that Interest Expense is a financing activity hence not taken in Operating Activity.

Note 1 -- Cash receipts from Customers

Beginning Accounts Receivable                 $250

Plus: Credit Sales made during the year     $720

Less: Ending Accounts Receivable              -$232

Cash Collected from Customers                   $738

Note 2 -- Cash payment for merchandise

Beginning Accounts Payable                                                 $158

Plus: Purchases made during the year (refer note 3)            $236

Less: Ending Accounts Payable                                              -$170

Cash Paid to Supplier during the year                                   $224

Note 3 -- Purchase made during the year

Cost of Goods Sold                                                                     $252

Plus: Ending Inventory                                                                $446

Less: Beginning Inventory                                                         -$462

Purchases made during the year                                              $236

Note 4 -- Cash paid for salaries expense

Salaries Expense incurred during the year                           $105

Add: Beginning Balance                                                           $98

Less: Ending balance                                                                -$86

Cash paid for salaries expense                                               $117

Note 5 -- Cash paid for Interest

Interest Expense incurred during the year                           $20

Add: Beginning Balance                                                         $32

Less: Ending balance                                                             -$43

Cash paid for interest                                                              $9

Note 6 -- Cash paid for Income Taxes

Income tax expense incurred during the year                $127

Add: Beginning Balance                                                      $22

Less: Ending balance                                                          -$33

Cash paid for Income Taxes                                                 $116

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