Following are the comparative Balance Sheets, the Income Statement, and one addi
ID: 2395072 • Letter: F
Question
Following are the comparative Balance Sheets, the Income Statement, and one additional piece of information for JME for 20X1. You are to prepare JME's Statement of Cash Flows using the direct method. Then redo the Operations Section under the indirect method. Jan 1 $16 200 190 25 Cash Accounts Receivable Inventory Prepaid Rent Equipment (net) Patent (net) Land Total Assets Dec 31 $60 215 180 20 981 207 732 $2,395 925 916 222 600 $2,169 $444 Sales $2,500 CGS 1,575 Gross Profit Salary Exp 250 Rent Exp 90 Selling Exp 180 Depreciation 85 Amortization 15 Interest Exp 22 Gain on Sale of Equipment 16 Inc Bef Tax 299 Income Tax 180 Net Income $119 Accounts Payable $420 Income Tax Payable 74 Mortgage Payable 800 Common Stock ($1 par) 300 Add't Paid in Capital 315 Retained Earnings 260 Total Liab & Equity $2,169 57 750 400 400 344 $2,395 *JME sold equipment with cost of $800 and B/V of $150 on the day it was sold.Explanation / Answer
Answer 1. JME Statement of Cash Flows (Direct Method) For the Year ended Dec 31, 20X1 Cash Flow From opearting Activities Cash recd from Cutomers 2,485.00 Cash Paid to Suppliers (1,541.00) Cash Paid For Operating Exp. (537.00) Cash Paid for I Tax (197.00) Cash Flow from Operating Activities 210.00 Cash flow from Investing Activities Purchase of Land (132.00) Purchase of Equipments (300.00) Sale of Equipment 166.00 Cash Flow / (used) from Investing activities (266.00) Cash Flow from Financing Activities Payment of Mortgage Payable (50.00) Issue of Common Stock 185.00 Dividends Paid (35.00) Cash Flow from Financing Activities 100.00 Net Increase / (Decrease) in Cash 44.00 Cash Beginning Balance - Jan 1, 20X1 16.00 Cash Ending Balance - Dec 31, 20X1 60.00 Calculation of Cash Recd. From Customers Sales Revenue 2,500.00 Add: Op. Accounts Receivables - Jan 1, 20X1 200.00 Total Due to Customers 2,700.00 Less: Cls. Accounts Receivable - Dec 31, 20X1 (215.00) Cash recd from Customers 2,485.00 Calculation of cash Paid to Suppliers Cost of Goods Sold 1,575.00 Add: Closing Inventory as on Dec 31,20X1 180.00 Balance 1,755.00 Less: opening Inventory - Jan 1, 20X1 (190.00) Purchases made during the year 1,565.00 Add: Opening Accounts Payable - Jan 1, 20X1 420.00 Total amount Due 1,985.00 Less: Closing Accounts Payable - Dec 31, 20X1 (444.00) Cash Paid to Suppliers 1,541.00 Calculation of Cash paid for Opearting Exp Operating Exp. ($250 + $90 + $180 + $22) 542.00 Add: Prepaid Rent - Dec 31, 20X1 20.00 Total Expenses Due 562.00 Less: Prepaid Rent - Jan 1, 20X1 (25.00) Cash Paid for Operating Expenses 537.00 Calculation of Cash paid for Income Tax Income Tax Expenses 180.00 Add: Tax Payable -Jan 1, 20X1 74.00 Balance 254.00 Less: Tax Payable - Dec 31, 20X1 (57.00) Cash paid for Income Tax 197.00 Equipment Account Beg. Bal. 916.00 Sale of Equipment 166.00 Gain on Sale of equip. 16.00 Purch. Of Equip. (Bal. fig.) 300.00 Depreciation 85.00 End. Bal. 981.00 1,232.00 1,232.00 Retained Earnings Dividends Paid (Bal. Fig) 35.00 Beg. Bal. 260.00 Net Income 119.00 End. Bal. 344.00 379.00 379.00 Answer 2. JME Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 20X1 Cash Flow From opearting Activities Net Income 119.00 Add/(Less) non cash effects on operating activities Depreciation expense 85.00 Amortization 15.00 Gain on Sale of Equipment (16.00) Increase in Accounts Receivables (15.00) Decrease in Inventory 10.00 Decrease in Prepaid Expenses 5.00 Increase in Accounts Payables 24.00 Decrease in Income Tax Payable (17.00) 91.00 Cash Flow from Operating Activities 210.00 Cash flow from Investing Activities Purchase of Land (132.00) Purchase of Equipments (300.00) Sale of Equipment 166.00 (266.00) Cash Flow / (used) from Investing activities Cash Flow from Financing Activities Payment of Mortgage Payable (50.00) Issue of Common Stock 185.00 Dividends Paid (35.00) Cash Flow from Financing Activities 100.00 Net Increase / (Decrease) in Cash 44.00 Cash Beginning Balance - Jan 1, 20X1 16.00 Cash Ending Balance - Dec 31, 20X1 60.00