The following income statement and selected balance sheet account data are available for Royce Interiors, Inc., at December 31, 2021.

Additional Information
1. Dividend revenue is recognized on the cash basis. All other income statement amounts are recognized on the accrual basis.
2. Operating expenses include depreciation expense of $49,000.

Instructions
a. Prepare a partial statement of cash flows, including only the operating activities section of the statement and using the direct method. Place brackets around numbers representing cash payments. Show supporting computations for the following.
1. Cash received from customers.
2. Interest and dividends received.
3. Cash paid to suppliers and employees.
4. Interest paid.
5. Income taxes paid.
b. Management of Royce Interiors, Inc., is exploring ways to increase the cash flows from operations.

One way that cash flows could be increased is through more aggressive collection of receivables. Assuming that management has already taken all the steps possible to increase revenue and reduce expenses, describe two other ways that cash flows from operations could be increased.

Transcribed Image Text:

Revenue: Net sales ROYCE INTERIORS, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2021 $1,300,000 300,000 60,000 110,000 End of Year $ 450,000 7,000 575,000 9,000 415,000 86,000 10,000 20,000 Dividend Income Interest Income Gain on sales of marketable securities. Total revenue and gains Costs and expenses: Cost of goods sold Operating expenses Interest expense Income tax expense Total costs and expenses Net Income Selected account balances: Accounts receivable Accrued Interest recelvable Inventories..... Short-term prepayments.. Accounts payable (merchandise suppliers). Accrued operating expenses payable Accrued Interest payable Accrued Income taxes payable $2,600,000 55,000 40,000 3,000 $2,698,000 $1,770,000 $928,000 Beginning of Year $ 440,000 3,000 550,000 8,000 410,000 90,000 8,000 22,000