Question

The following balance sheets and income statement were taken from the records of Rosie- Lee Company: Rosie-Lee Company Comparative Balance Sheets At June 30, 20X1 and 20X2 1 20X1 20X2 2 Assets 3 Cash $270,000.00 $333,000.00 4 Accounts receivable 126,000.00 144,000.00 5 Investments 0.00 54,000.00 6 Plant and equipment 180,000.00 189,000.00 7 Accumulated depreciation (54,000.00) (57,600.00) 8 Land 36,000.00 54,000.00 9 Total assets $558,000.00 $716,400.00 10 Liabilities and equity 11 Accounts payable $72,000.00 $90,000.00 12 Mortgage payable 108,000.00 0.00 13 Bonds payable 0.00 90,000.00 14 Preferred stock 36,000.00 15 Common stock 180,000.00 288,000.00 16 Retained earnings 162,000.00 248,400.00 17 Total liabilities and equity $558,000.00 $716,400.00 Rosie-Lee Company Income Statement For the Year Ended June 30, 20X2 1 Sales $920,000.00 2 Cost of goods sold (620,000.00) 3 Gross margin $300,000.00 4 Operating expenses (177,600.00) 5 Net income $122,400.00 Additional transactions were as follows:

A. Sold equipment costing $21,600, with accumulated depreciation of $16,200, for $3,600. B. Issued bonds for $90,000 on December 31. C. Paid cash dividends of $36,000. D. Retired mortgage of $108,000 on December 31. Required: 1(a). Prepare a schedule of operating cash flows using the indirect method. 1(b). Prepare a schedule of operating cash flows using the direct method. 2. Prepare a statement of cash flows using the indirect method.

Answer 1

Answer with working notes is given below

T accounts working is also given to find Depreciation expense and purchase of equipment during the year

1 al Working notes: Rosie -Lee Company Cash Flow Statement under Indirect method For the year ended June 30, 20X2 Cash flows from Operating Activities Net Income $122,400 Add: Adjustments to reconcile net income to Depreciation $19,800 Loss on sale of equipment $1,800 Changes in Working Capital Increase in Accounts Receivable -$18,000 Increase in Account payable $18,000 Net Cash provided by Operating Activities $144,000 opening balance Purchase Equipment $180,000 Accumulated Dep $30,600 Bank P and L Account $16,200 $3,600 $1,800 closing balance $210,600 $189,000 $210,600 1b) $54,000 $19,800 Cash Flow Statement under Direct method For the year ended June 30, 20X2 Cash flows from Operating Activities Cash collections from customers $902,000 Payment for Suppliers -$602,000 Payment for Operating expenses -$156,000 Cash flow from Operating activities $144,000 Accumulated Depreciation-Baking Equipment Equipment $16,200 Opening Balance (Dep on Equip sold) P and L Account Closing balance $57,600 (Depreciation during the year) $73,800 $73,800 working notes: Amount of cash received from Customers Sales Add: Increase in Accounts receivable Net cash received from customers $920,000 -$18,000 $902,000 payment to suppliers Cost of Goods sold Less: Increase in Accounts payable Cash paid for Suppliers $620,000 -$18,000 $602,000 Operating expenses Less: Depreciation Less: Loss on sale of equipment Net cash paid for operating expense $177,600 -$19,800 -$1,800 $156,000 10) Rosie - Lee Company Cash Flow Statement under Indirect method For the year ended June 30, 20X2 Cash flows from Operating Activities Net Income $122,400 Add: Adjustments to reconcile net income to Depreciation $19,800 Loss on sale of equipment $1,800 Changes in Working Capital Increase in Accounts Receivable -$18,000 Increase in Account payable $18,000 Net Cash provided by Operating Activities $144,000 Cash flows from Investing Activities Sale of equipment $3,600 Purchase of Equipment -$30,600 Purchase of Investments - $54,000 Purchase of Land -$18,000 Net Cash used by Investing Activities -$99,000 Cash flows from Financing Activities Repayment of Mortgage payable -$108,000 Issue of Bond payable $90,000 Issue of Common stock $108,000 Redemption of Preferred stock -$36,000 Dividend paid -$36,000 Net Cash provided by Financing Activities $18,000 Net Cash inflow/outflow) $63,000 Opening balance of cash $270,000 Closing balance of cash $333,000