Question

The income statement and a schedule reconciling cash flows from operating activities to net income are provided below for Macrosoft Corporation.

MACROSOFT CORPORATION Income Statement For the Year Ended December 31, 2016 ($ in millions)

Revenues and gains:
Sales $330/00
Gain on sale of cash equivalents 3.00
Gain on sale of investments 25.00 $358.00
Expenses and loss:
Cost of goods sold $130.00
Salaries 41.00
Interest expense 13.00
Insurance 21.00
Depreciation 11.00
Patent amortization 5.00
Loss on sale of land 7.00 228.00
Income before tax 130.00
Income tax expense 65.00
Net income $65.00
Reconciliation of Net Income to Net Cash Flows from Operating Activities ($ in millions)

Net income $65
Adjustments for noncash effects:
Depreciation expense 11.00
Patent amortization expense 5.00
Loss on sale of land 7.00
Gain on sale of investment (25.00)
Decrease in accounts receivable 7.00
Increase in inventory (13.00)
Increase in accounts payable 19.00
Decrease in bond discount 2.00
Increase in salaries payable 7.00
Decrease in prepared insurance 5.00
Increase in income tax payable 11.00
Net cash flows from operating activities $101.00
Required: Prepare the cash flows from operating activities section of the statement of cash flows (direct method). (Enter your answers in millions rounded to 2 decimal places (i.e., 5, 500,000 should be entered as 5.50). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Explanation:

The preparation of the cash flows from operating activities section is shown below:-

Working note:-

Sales                                                            $330

Add Decrease in Accounts Receivables   $7

Cash collected from customers                 $337                              

Cost of goods sold                                      $130

Add Increase in inventory                           $13

Less Increase in accounts payable            $19

Paid cash to suppliers                                 $124

Salary expenses                                           $41

Less Increase in payable salaries                $7

Paid cash to employees                               $34

Insurance expenses                                      $21

Less Decrease in prepaid insurance            $5

Paid cash for insurance                                $16

Income tax expenses                                     $65

Less Increase in income tax payable            $11

Paid cash for income tax                               $54

Interest expenses                                           $13

Less Decrease in bond expenses                  $2

Paid cash for interest expense                       $11

Statement of Cash Flow

Cash collected from customers                    $337

Gain on sale of cash equivalents                  $3

less: Paid cash to suppliers                           $124

less: Paid cash to employees                        $34

less: Paid cash to insurance                           $16

less: Paid cash for interest                              $11

less: Paid cash for income tax                        $54

Net cash provided by operating activities     $101