Question

Business Course # My Subscriptions - Statement of Cash Flows (Direct Method) Dair Company's income statement and comparative balance sheets follow. DAIR COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 700.000 Cost of goods sold Wages and other operating expenses 95,000 Depreciation expense 22,000 Amortization expense Interest expense Income tax expense 34,000 Loss on bond retirement 5,000 609,000 Net income 591,000 $ 440,000 7.000 6.000 Support eest expense DAIR COMPANY Balance Sheets Dec. 31, 2011 Dec. 31, 2010 Assets Cash Accounts receivable Inventory Prepaid expenses $ 45,000 53,000 103,000 12.000 $ 22,000 48,000 112,000 11,000

Answer 1

A) change in cash

Cash December 31, 2011 45,000

Cash December 31, 2010 . 22,000

Cash increase during 2011 23,000

DAIR COMPANY

STATEMENT OF CASH FLOWS

FOR YEAR ENDED DEC 31,2011

Cash flows form operating activities
Cash recieved form customers		695,000
Cash paid for merchandise purchased	-424,000
Cash paid for wages & other operating expenses	-96,000
Cash paid for interest	-11,000
Cash paid for income taxes	-39,000	570,000
Net cash provided by operating activities		125,000
Cash flows from investing activities
Sale of equipment		17,000
Cash flows from Financing activities
Retirement of bonds payable	-122,000
Issuance of common stock	24,000
Payments of dividend	-21,000
Net cash used by financing activities		-119,000
Net increase(decrease) in cash		23,000
Cash begining of year		22,000
Cash at the end of year		45,000

C) Supplemental cash flow disclosure

Cash paid for interest. 11,000

Cash paid for income Taxes. 39,000

2) schedule of non cash investing and financing activities

Issuance of bonds payable to acquire Equipment. 65,000

Working notes

Cash received from customers = sales- Increase in account recievable

700,000 - 53,000-48,000=695,000

Cash paid for merchandise purchased= cost of goods sold -decrease in inventory - increase in account payable

440,000-(112,000-103,000)-(33,000-26,000)=424,000

Cash paid for wages & operating activities= wages and other operating expenses+ increase in prepaid expenses

95,000+1,000=96,000

Cash paid for interest expense = interest exp + decrease in intresti payable

6000 + 7,000 - 2,000= 11,000

Cash paid for income tax paid= income tax expense + decrease in income tax payable

34,000+ 8,000- 3,000

Retirement of bonds payable = cost + loss

117,000+5,000 = 122,000