=+EX 16-22 Cash flows from operating activities—

direct method obj. 3

✔ Net cash flow from operating activities, $69,760 During the current year, the cost of merchandise sold was $448,500, and the operating expenses other than depreciation were $78,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows.

Determine the amount reported on the statement of cash flows for

(a) cash payments for merchandise and

(b) cash payments for operating expenses.

The income statement for M2 Pizza Pie Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows:

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $202,400 Cost of merchandise sold . . . . . . . . . . . . . . . . . 70,000 ________ Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $132,400 Operating expenses:

Depreciation expense . . . . . . . . . . . . . . . . . . $17,500 Other operating expenses . . . . . . . . . . . . . . 52,400 _______ Total operating expenses . . . . . . . . . . . . . 69,900 ________ Income before income tax . . . . . . . . . . . . . . . . $ 62,500 Income tax expense . . . . . . . . . . . . . . . . . . . . . 18,000 ________ Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,500 ________ ________