I. Prepare a statement of cash flow on both a direct and indirect basis 2017 201
ID: 2528356 • Letter: I
Question
I. Prepare a statement of cash flow on both a direct and indirect basis 2017 2016 Change Assets: Cash 215,000 70,000 145,000 Accounts receivable, net 87,000 55,000 32,000 Inventory 74,000 60,000 14,000 Prepaid expenses 12,000 20,000 -8,000 Investments 70,000 80,000 -10,000 Property, plant & equipment 750,000 550,000 200,000 Accumulated depreciation -90,000 -70,000 -20,000 Patents 6,000 10,000 -4,000 Total Assets 1,124,000 775,000 349,000 Liabilities & Equity Accounts payable 37,000 50,000 -13,000 Accrued liabilities 26,000 40,000 -14,000 Taxes payable 18,000 4,000 14,000 Long-term Notes Payable 100,000 - Common stock 200,000 200,000 Additional paid in capital 336,000 286,000 50,000 Retained earnings 407,000 195,000 212,000 Total liabilities and equity 1,124,000 775,000 349,000 Sales 1,450,000 Cost of goods sold 780,000 Gross profit 670,000 Operating expenses 290,000 Pre-tax Operating income 380,000 Gain on sale of investments 6,000 Gain on sale of equipment 4,000 Pre-tax income 390,000 Income taxes 78,000 Net income 312,000 a. Stock option expense of $50,000 was recognized in 2017 b. Equipment of $210,000 was purchased using $100,000 note payable and cash c. Equipment with cost of $10,000 and book value of $5,000 was sold for $9,000 d. Investments with a cost of $10,000 were sold for $16,000 I. Prepare a statement of cash flow on both a direct and indirect basis 2017 2016 Change Assets: Cash 215,000 70,000 145,000 Accounts receivable, net 87,000 55,000 32,000 Inventory 74,000 60,000 14,000 Prepaid expenses 12,000 20,000 -8,000 Investments 70,000 80,000 -10,000 Property, plant & equipment 750,000 550,000 200,000 Accumulated depreciation -90,000 -70,000 -20,000 Patents 6,000 10,000 -4,000 Total Assets 1,124,000 775,000 349,000 Liabilities & Equity Accounts payable 37,000 50,000 -13,000 Accrued liabilities 26,000 40,000 -14,000 Taxes payable 18,000 4,000 14,000 Long-term Notes Payable 100,000 - Common stock 200,000 200,000 Additional paid in capital 336,000 286,000 50,000 Retained earnings 407,000 195,000 212,000 Total liabilities and equity 1,124,000 775,000 349,000 Sales 1,450,000 Cost of goods sold 780,000 Gross profit 670,000 Operating expenses 290,000 Pre-tax Operating income 380,000 Gain on sale of investments 6,000 Gain on sale of equipment 4,000 Pre-tax income 390,000 Income taxes 78,000 Net income 312,000 a. Stock option expense of $50,000 was recognized in 2017 b. Equipment of $210,000 was purchased using $100,000 note payable and cash c. Equipment with cost of $10,000 and book value of $5,000 was sold for $9,000 d. Investments with a cost of $10,000 were sold for $16,000Explanation / Answer
Cash Flow Statement INDIRECT Method
Particulars
Amount
Total Amount
Cash Flow from Operating Activities
Net Income
312,000
Add: Items for cash basis
Depreciation
25,000
Patent Amortization
4,000
Gain on sale of Equipment
(4,000)
Gain on sale of Investments
(6,000)
Accounts Receivable (Increase)
(32,000)
Inventory(Increase)
(14,000)
Prepaid Expenses(Decrease)
8,000
Accounts Payable (Decrease)
(13,000)
Accrued Liabilities (Decrease)
(14,000)
Income Tax Payable(Increase)
14,000
Cash Flow provided by operating activities
280,000
Cash Flow from Investing Activates
Sale of Equipment
9,000
Purchase of Equipment (only in cash)
(110,000)
Sale of Investments
16,000
Cash Used by Investing activity
(85,000)
Cash Flow from Financing Activity
Stock Expense
(50,000)
Cash provided by Financing activities
(50,000)
Changes in cash & Cash Equivalents
145,000
Cash at the Beginning of year
70,000
Cash at end of year
215,000
NOTE: Accumulated Depreciation
Particulars
Amount
Particulars
Amount
Opening Balance
70,000
Sale of Equipment
5,000
Depreciation
25,000
Closing Balance
90,000
Particulars
Amount
Total Amount
Cash Flow from Operating Activities
Net Income
312,000
Add: Items for cash basis
Depreciation
25,000
Patent Amortization
4,000
Gain on sale of Equipment
(4,000)
Gain on sale of Investments
(6,000)
Accounts Receivable (Increase)
(32,000)
Inventory(Increase)
(14,000)
Prepaid Expenses(Decrease)
8,000
Accounts Payable (Decrease)
(13,000)
Accrued Liabilities (Decrease)
(14,000)
Income Tax Payable(Increase)
14,000
Cash Flow provided by operating activities
280,000
Cash Flow from Investing Activates
Sale of Equipment
9,000
Purchase of Equipment (only in cash)
(110,000)
Sale of Investments
16,000
Cash Used by Investing activity
(85,000)
Cash Flow from Financing Activity
Stock Expense
(50,000)
Cash provided by Financing activities
(50,000)
Changes in cash & Cash Equivalents
145,000
Cash at the Beginning of year
70,000
Cash at end of year
215,000