accounting 248 – Essay Writers

Cash flow information: Direct and indirect methods The comparative year-end balance sheets of USA Graphics, Inc., revealed the following activity in the company’s current accounts:

 

20X8

20X7

Increase / Decrease)

Current assets

 
 
 

Cash

$55,400

$35,200

$20,200

 

Accounts receivable (net)

83,800

88,000

-4,200

 

Inventory

243,400

233,800

9,600

 

Prepaid expenses

25,400

24,200

1,200

 

 
 
 
 

 

Current liabilities

 
 
 

 

Accounts payable

$123,600

$140,600

($17,000)

 

Taxes payable

43,600

49,200

-5,600

 

Interest payable

9,000

6,400

2,600

 

Accrued liabilities

38,800

60,400

-21,600

 

Note payable

44,000

44,000

 

 
 
 
 

 

The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm’s selling and administrative expenses. The company’s condensed income statement follows.
 
 
 
 
 

USA GRAPHICS INC.

Income Statement

for the Year Ended December 31, 20X8

 

 

 

 

 

 

 

 

 

Sales

 
 
 
 
 
 

$691,800

 

Less: Cost of goods sold

 
 
 
 

223,000

 

Gross profit

 
 
 
 
 

$468,800

 

 

 
 
 
 
 
 
 

 

Less: Selling & administrative expenses

 

$177,000

 
 

 

Depreciation expense

 

 
 
 

18,000

 
 

 

     Interest expense  

 

 
 
 

27,000

 

222,000

 

 

 
 
 
 
 
 
 

 

Add: gain on sale of land

 
 
 
 

$246,800

 

 

 
 
 
 
 
 

18,800

 

Income before taxes

 
 
 
 

$265,600

 

Income taxes

 
 
 
 
 

38,300

 

Net income

 
 
 
 
 

$227,300

 

 

 

 

 

 

 

 

 

 

 
Other data:
1.      Long-term investments were purchased for cash at a cost of $64,200.
2.      Cash proceeds from the sale of land totaled $74,200.
3.      Store equipment of $34,000 was purchased by signing a short-term note payable. Also, a $140,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
4.      A long-term note of $42,200 was repaid.
5.      Twenty thousand shares of common stock were issued at $5.19 per share.
6.      The company paid cash dividends amounting to $125,000.
 
Instructions:
a.       Prepare the operating activities section of the company’s statement of cash flows, assuming use of:
1.      The direct method.
2.      The indirect method.
 
b.      Prepare the investing and financing activities sections of the statement of cash flows.
 

 
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