GUESSER COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012 Sales $755,000 Cost of goods sold 543,000 Gross profit 212,000 Operating expenses Selling expenses $52,000 Administrative expenses 89,000 141,000 Net income $ 71,000 Additional information: 1. Accounts receivable decreased $63,000 during the year. 2. Inventory increased $38,000 during the year. 3. Prepaid expenses increased $12,000 during the year. 4. Accounts payable to increased $25,000 during the year. 5. Accrued expenses payable increased $6,000 during the year.

Instruction: Prepare the operating section of the cash flow statement using the direct method.

a

Cash received from customers (hint: use Sales, A/R in your calculation)

b

Cash paid to suppliers (hint: use COGS, A/P and inventory in your calculation)

c

Cash paid as Operating expenses(hint: use Operating expenses, prepaid expenses and accrued expenses in your calculation)

d

Net cash flow from operating activities (i.e. a-b-c)