Selected information from rockway, inc.'s u. s. gaap financial statements for the year ended december 31, included the following (in $): 2004 2005 sales 17,000,000 21,000,000 cost of goods sold 11,000,000 15,000,000 interest paid 800,000 1,000,000 current income taxes paid 700,000 1,000,000 accounts receivable 3,000,000 2,500,000 inventory 2,400,000 3,000,000 property, plant & equip. 2,000,000 16,000,000 accounts payable 1,000,000 1,400,000 long-term debt 8,000,000 9,000,000 common stock 4,000,000 5,000,000 using the direct method, cash provided or used by operating activities (cfo) in the year 2005 was: a) $5,300,000. b) $4,300,000. c) $6,300,000.

Cash flow from operating activties 3,800,000

Explanation:

Cash collected from sales:(A)    21,000,000

Cash paid to supplier (B)           (15,200,000)

Interest paid                                 (1,000,000)

income taxes paid                       (1,000,000)

Cash flow from operating activties 3,800,000

(A)we use the sales and account receivable account

3,000,000 + 21,000,000 - 2,500,000 = 21,500,000

(B) we solve for purchases with COGS and inventory

purchases:

15,000,000 + 3,000,000 - 2,400,000 = 15,600,000

and now, with purchase along wiht account payable we solve for

paid to suppliers

1,000,000 + 15,600,000 - 1,400,000 = 15,200,000

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answer; experimentation;