Question

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Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.

GOLDEN CORPORATION Comparative Balance Sheets December 31
	Current Year						Prior Year
Assets
Cash		$	164,000					$	107,000
Accounts receivable			83,000						71,000
Inventory			601,000						526,000
Total current assets			848,000						704,000
Equipment			335,000						299,000
Accum. depreciation—Equipment			(158,000	)					(104,000	)
Total assets		$	1,025,000					$	899,000
Liabilities and Equity
Accounts payable		$	87,000					$	71,000
Income taxes payable			28,000						25,000
Total current liabilities			115,000						96,000
Equity
Common stock, $2 par value			592,000						568,000
Paid-in capital in excess of par value, common stock			196,000						160,000
Retained earnings			122,000						75,000
Total liabilities and equity		$	1,025,000					$	899,000

  

GOLDEN CORPORATION Income Statement For Current Year Ended December 31
Sales				$	1,792,000
Cost of goods sold					1,086,000
Gross profit					706,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		494,000			548,000
Income before taxes					158,000
Income taxes expense					22,000
Net income				$	136,000

Additional Information on Current Year Transactions

1. Purchased equipment for $36,000 cash.
2. Issued 12,000 shares of common stock for $5 cash per share.
3. Declared and paid $89,000 in cash dividends.

Required:
Prepare a complete statement of cash flows using the DIRECT method for the current year.

Answer 1

GOLDEN CORPORATION
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash Flows from Operating Activities
Cash receipts from customers	1780000
Cash paid for inventory purchases	-1145000
Cash paid for other operating expenses	-494000
Cash paid for income taxes	-19000
Net cash provided by operating activities		122000
Cash Flows from Investing Activities
Purchase of equipment	-36000
Net cash used by investing activities		-36000
Cash Flows from Financing Activities
Issuance of Common stock (12000 x $5)	60000
Payment of cash dividends	-89000
Net cash used by financing activities		-29000
Net increase (decrease) in cash		57000
Cash balance at beginning of year		107000
Cash balance at end of year		164000

Working:

Cash receipts from customers
Sales Revenue	1792000
Less: Increase in Accounts Receivable (83000 - 71000)	12000
	1780000
Cash paid for inventory purchases
Cost of goods sold	1086000
Add: Increase in Inventory (601000 - 526000)	75000
Less: Increase in Accounts Payable (87000 - 71000)	16000
	1145000
Cash paid for income taxes
Income tax expense	22000
Less: Increase in Income taxes payable (28000 - 25000)	3000
	19000