Cash Flow from Operations—Direct Method
The following combined income and retained earnings statement, along with selected balance sheet data, are provided for Lincoln Company:
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Lincoln Company |
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Combined Income and Retained Earnings Statement |
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For the Year Ended December 31, 2008 |
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Revenues: |
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Net sales revenue |
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$185,000 |
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Other revenues |
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5,000* |
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Total revenues |
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$190,000 |
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Expenses: |
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Cost of goods sold |
$118,000 |
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Selling and administrative expenses |
32,100 |
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Depreciation expense |
7,200 |
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Interest expense |
1,500 |
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Total expenses |
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158,800 |
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Income before income taxes |
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$ 31,200 |
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Income taxes |
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9,740 |
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Net income |
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$ 21,460 |
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Retained earnings, January 1, 2008 |
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48,000 |
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$ 69,460 |
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Dividends declared and paid |
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8,000 |
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Retained earnings, December 31, 2008 |
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$ 61,460 |
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Balance Sheet Amounts |
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Beginning of Year |
End of Year |
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Accounts receivable |
$32,000 |
$35,000 |
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Inventory |
42,600 |
39,400 |
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Prepaid expenses |
2,100 |
1,700 |
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Accounts payable |
17,800 |
21,200 |
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Interest payable |
2,500 |
2,000 |
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Income taxes payable |
1,200 |
4,700 |
Instructions:
1. Using the direct method, compute the amount of net cash provided by (used in) operating activities for Lincoln Company for 2008.
2. What is the impact of dividends paid on net cash flow from operations? Explain.