(Appendix 21.1) Operating Cash Flows Spreadsheet Method

The following 2016 information is available for Stewart Company:

Condensed Income Statement for 2016
Sales		$9,000
Cost of goods sold		(6,000)
Other expenses		(2,000)
Loss on sale of equipment		(260)
Gain on sale of land		400
Net income		$1,140

		Comparative Balance Sheets
		December 31, 2015		December 31, 2016
Cash		$700		$1,130
Accounts receivable		450		310
Inventory		350		400
Land		300		500
Equipment		1,600		1,800
Less: Accumulated depreciation		(200)		(150)
Total Assets		$3,200		$3,990
Accounts payable		$600		$750
Bonds payable (due 1/1/2018)		1,000		1,000
Common stock, $10 par		900		1,400
Retained earnings		700		840
Total Liabilities and Shareholders Equity		$3,200		$3,990

Partial additional information:

• The equipment that was sold for cash had cost $400 and had a book value of $300.
• Land that was sold brought a cash price of $530.
• Fifty shares of stock were issued at par.

Required:

Based only on the information presented and using the direct method, prepare the cash flows from operating activities section of the 2016 statement of cash flows for Stewart using the spreadsheet method. Use a minus sign to indicate cash outflows, a decrease in cash or cash payments.

STEWART COMPANY
Statement of Cash Flows (Partial)
For Year Ended December 31, 2016
Operating Activities:
Cash inflows:
Collections from customers	$
Cash inflows from operating activities		$
Cash outflows:
Payments to suppliers	$
Other operating payments
Cash outflows for operating activities
Net cash provided by operating activities		$

Feedback

Under the direct method, a company computes operating cash inflows and deducts its operating cash outflows to determine its net cash flow from operating activities. A company reports its cash inflows from operating activities in three categories: collections from customers, interest and dividends collected, and other operating receipts, if any. Generally, these cash inflows from operating activities are calculated by an analysis of income statement and balance sheet items.

A company reports its cash outflows from operating activities in the following five categories: payments to suppliers, payments to employees, other operating payments, payments of interest, and payments of income taxes. Generally, these cash outflows from operating activities are calculated by an analysis of income statement and balance sheet items.