Statement of Cash Flows (Direct Method) The Forrester Company’s income statement and comparative balance sheets as...

Answer is given below

a) Change in Cash occurred during the period $28,000 Amount $668,000 ($386,000) ($102,000) ($34,000) ($25,000) $121,000 Cash Flow Statement under Direct method Cash flows from Operating Activities A Cash received from customers B Cash paid to suppliers C Cash Paid to employees D Cash paid for operating expenses E Cash paid for Income taxes Net Cash provided by Operating Activities Cash flows from Investing Activities New plant purchased Net Cash provided by Investing Activities Cash flows from Financing Activities Dividends paid Common shares raised during the year Net Cash provided by Financing Activities Net Cash inflow/(outflow) Opening balance of cash Closing balance of cash ($119,000) ($119,000) ($31,000) $57,000 $26,000 $28,000 $30,000 $58,000 c) Free Cash flows Net cash provided by Operating Activities Less: Fixed Assets purchased Free Cash flows $121,000 ($119,000) $2,000 Operating cash flow to Current Liabilities ratio Operating cash flow Current Liabilities $121,000 $50,000 Ratio 2.42 Operating cash flow to Capital expenditures ratio Operating cash flow Capital expenditure Ratio $121,000 $119,000 1.02 Working notes: A Cash received from customers Sales Add: Decrease in Accounts receivable Net cash received from customers $660,000 $8,000 $668,000 Cash paid to suppliers Cost of Sales Add : Increase in inventory cost of purchase $376,000 $22,000 $398,000 cost of purchase Less: Increase in payable Net payment to suppliers $398,000 $12,000 $386,000 Cash Paid to Employees Wages expense Less: Increase in salaries payable Net cash paid to Employees $107,000 $5,000 $102,000 Cash paid for operating expenses Rent expense Add: increase in prepaid rent cash payments for operating expenses $28,000 $6,000 $34,000 Cash paid for Income tax Income tax Add: Decrease in income tax payable cash paid for income tax $24,000 $1,000 $25,000