Construct Direct and Indirect Cash Flow Statements for Ship Shape Retail Inc.

- Year 1

You have…
1 Cash purchases 250
2 Cash sales 370
3 Cash expenses 40
4 Depreciation 55
There was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue ⬜ Cash from sales ⬜ Net income ⬜

Purchases ⬜ Cash on purchases ⬜

Expenses ⬜ Cash expenses ⬜

Depreciation ⬜ Depreciation ⬜

Net income – Change in cash – Change in cash –

Year 2

You have…
1 Cash purchases 280
2 Cash sales 300
3 Sales on credit 170
4 Cash expenses 50
5 Receipts from receivables 140
6 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue ⬜ Cash from sales ⬜ Net income ⬜

Purchases ⬜ Cash on purchases ⬜ Increase in A/R ⬜

Expenses ⬜ Cash expenses ⬜

Depreciation ⬜ Depreciation ⬜

Net income – Change in cash – Change in cash –

Practice Exercise - Ship Shape Retail Page 1 of 4

Year 3

You have…
1 Cash purchases 150
2 Cash sales 320
3 Sales on credit 310
4 Purchases on credit 180
5 Receipts from receivables 260
6 Payments to payables 140
7 Cash expenses 70
8 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue ⬜ Cash from sales ⬜ Net income ⬜

Purchases ⬜ Cash on purchases ⬜ Increase in A/R ⬜

Expenses ⬜ Cash expenses ⬜ Increase in A/P ⬜

Depreciation ⬜ Depreciation ⬜

Net income – Change in cash – Change in cash –

Year 4

You have…
1 Cash purchases 200
2 Cash sales 400
3 Sales on credit 410
4 Purchases on credit 380
5 Receipts from receivables 390
6 Payments to payables 360
7 Cash expenses 100
8 Depreciation 55
There was closing inventory of 35.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue ⬜ Cash from sales ⬜ Net income ⬜

Opening inventory ⬜ Cash on purchases ⬜ Increase in A/R ⬜

Purchases ⬜ Cash expenses ⬜ Increase in A/P ⬜

Closing Inventory ⬜ Increase in inventory ⬜

Cost of sales ⬜

Expenses ⬜

Depreciation ⬜ Depreciation ⬜

Net income – Change in cash – Change in cash –

For a value of zero, please enter a zero instead of leaving the cell blank. ⁽¹⁾

Practice Exercise - Ship Shape Retail Page 2 of 4

Construct Direct and Indirect Cash Flow Statements for Ship Shape Retail Inc. - Year 1

You have…
1 Cash purchases 250
2 Cash sales 370
3 Cash expenses 40
4 Depreciation 55
There was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 370 Cash from sales 370 Net income –

Purchases (250) Cash on purchases (250)
Expenses (40) Cash expenses (40)
Depreciation (55) Depreciation 55
Net income 25 Change in cash 80 Change in cash 55

Year 2

You have…
1 Cash purchases 280
2 Cash sales 300
3 Sales on credit 170
4 Cash expenses 50
5 Receipts from receivables 140
6 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 470 Cash from sales 440 Net income –

Purchases (280) Cash on purchases (280) Increase in A/R (30)
Expenses (50) Cash expenses (50)
Depreciation (55) Depreciation 55
Net income 85 Change in cash 110 Change in cash 25

Practice Exercise - Ship Shape Retail Page 3 of 4

Year 3

You have…
1 Cash purchases 150
2 Cash sales 320
3 Sales on credit 310
4 Purchases on credit 180
5 Receipts from receivables 260
6 Payments to payables 140
7 Cash expenses 70
8 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 630 Cash from sales 580 Net income –

Purchases (330) Cash on purchases (290) Increase in A/R (50)
Expenses (70) Cash expenses (70) Increase in A/P 40
Depreciation (55) Depreciation 55
Net income 175 Change in cash 220 Change in cash 45

Year 4

You have…
1 Cash purchases 200
2 Cash sales 400
3 Sales on credit 410
4 Purchases on credit 380
5 Receipts from receivables 390
6 Payments to payables 360
7 Cash expenses 100
8 Depreciation 55
There was closing inventory of 35.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 810 Cash from sales 790 Net income –

Opening inventory – Cash on purchases (560) Increase in A/R (20)
Purchases (580) Cash expenses (100) Increase in A/P 20
Closing Inventory 35 Increase in inventory (35)
Cost of sales (545)
Expenses (100)
Depreciation (55) Depreciation 55
Net income 110 Change in cash 130 Change in cash 20

Practice Exercise - Ship Shape Retail Page 4 of 4