Question

Michaels Company had the following information available at the end of 2014. MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2014 AND 2013 2014 Cash $10,040 Accounts receivable 21,010 Short-term investments 21,480 Inventory 41,550 Prepaid rent 2,390 Prepaid insurance 2,420 Supplies 1,260 Land 124,400 Buildings 350,210 Accumulated depreciation-buildings (105,330 ) Equipment 524,570 Accumulated depreciation-equipment (130,700 ) Patents 45,030 Total assets $908,330 2013 $3,910 13,900 31,970 36,900 13,280 990 750 173,500 350,210 (87,970 ) 400,940 (113,610 ) 51,940 $876,710 Accounts payable Income taxes payable Salaries and wages payable Short-term notes payable Long-term notes payable Bonds payable Premium on bonds payable $22,510 5,010 5,360 10,010 60,540 400,410 14,565 $31,210 4,040 3,990 10,010 70,290 400,410 30,190
please do all!

Answer 1

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Part a. Direct Method
Cash flows from operating activities
Cash Receipts:
Cash received from customers (Working-1)		$                                                      1,153,770
Dividend Received		$                                                              3,330	$     1,157,100
Cash Payments:
Cash paid to suppliers (Working-2)		$                                                          761,370
Cash paid for operating expense (Working-3)		$                                                          227,090
Cash paid for interest (Working-4)		$                                                            67,995
Cash paid for taxes (Working-5)		$                                                            38,500	$   -1,094,955
Net cash provided by operating activities			$           62,145
Cash flows from investing activities
Sale of short term investment	$31,970-$21,480+$4,820	$                                                            15,310
Sale of land	$173,500-$124,400+$8,390	$                                                            57,490
Purchase of equipment	$524,570-$400,940	$                                                        -123,630
Net cash used by investing activities			$         -50,830
Cash flows from financing activities
Proceeds from issuance of common stock	240490-219160+25805-18160	$                                                            28,975
Principal payments on long-term loan	$60,540-$70,290	$                                                             -9,750
Dividend paid		$                                                          -24,410
Net cash used by financing activities			$           -5,185
Net increase in cash and cash equivalents			$             6,130
Cash and cash equivalents, Beginning			$             3,910
Cash and cash equivalents, Ending			$           10,040
Working:
(1)   Cash received from customers
Sales revenue		$                                                      1,160,880
Less: Increase in accounts receivable		$                                                             -7,110
Cash received from customers		$                                                      1,153,770
(2)             Cash paid to suppliers
Cost of goods sold		$                                                          748,020
Add: Increase in inventory		$                                                              4,650
		$                                                          752,670
Add: Decrease in accounts payable		$                                                              8,700
Paid to suppliers for goods and services		$                                                          761,370
(3) Cash paid for Operating expense
Operating Expense		$                                                          278,770
Less: Depreciation/Amortization Expense		$                                                          -41,360
Less: Decrease in Prepaid Rent		$                                                          -10,890
Add: Increase in prepaid insurance		$                                                              1,430
Add: Increase in office supplies		$                                                                  510
Less:Increase in salaries and wages payable		$                                                             -1,370
Cash paid to and on behalf of employees		$                                                          227,090
(4) Interest paid
Interest Expense		$                                                            52,370
Add: Decrease in bond premium		$                                                            15,625
Interest Paid		$                                                            67,995
(5) Income taxes paid
Income tax expense		$                                                            39,470
Less: Increase in income tax payable		$                                                                -970
Income taxes paid		$                                                            38,500
Part b. Indirect Method (Reconcilliation schedule)
Cash flows from operating activities
Net income			$           58,790
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense		$                                                            41,360
Gain on sale of Short term investment		$                                                             -8,390
Gain on sale of Land		$                                                             -4,820
Amortization of bond premium		$                                                          -15,625
Increase in accounts receivable		$                                                             -7,110
Inrease in inventory		$                                                             -4,650
Decrease in prepaid rent		$                                                            10,890
Increase in Prepaid insurance		$                                                             -1,430
Increase in office supplies		$                                                                -510
Decrease in accounts payable		$                                                             -8,700
Increase in salaries and wages payable		$                                                              1,370
Increase in income tax payable		$                                                                  970
Total adjustments			$             3,355
Net cash provided by operating activities			$           62,145