Question

Sived December 31, 2021, appears below. Service revenue Operating expenses Incore before income taxes Income tax expense Net income $1,220,000 see, eee 320, eee 8e, en $ 240, ped The following balance sheet Information also is available Accounts receivable Accrued liabilities (for operating expenses) Income taxes payable 12/31/2021 12/31/2020 $ 455,000 $ 98,eee 160,00 120,00 112, eee se, eee 30,00 55.000 In addition, the following transactions took place during the year 1. Common stock was issued for $140.000 in cash 2. Long-term Investments were sold for $70,000 in cash The original cost of the investments also was $70,000 3. $100.000 in cash dividends was paid to shareholders 4. The company has no outstanding debt other than those payables listed above. 5. Operating expenses include $50.000 in depreciation expense. Required: 1. Prepare a statement of cash flows for 2021 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities 2. Prepare the cash flows from operating activities section of Diversified's 2021 statement of cash nows using the Indirect method < Prev 9 of 9 !!! ype here to search o @

Answer 1

Note 1 :
To Find Out Collections from Customers :
Accounts Receivable
Beg .Bal	$ 120,000
Service Revenue	$ 1,220,000	Collection from	$ 1,180,000
		Customer (Bal in Fig )
		End. Bal	$ 160,000
	$ 1,340,000		$ 1,340,000
Note 2 :
To Find out Payment of Operating Expenses :
Accrued Liabilities
		Beg .Bal	$ 80,000
Payment of		Operating Expenses	$ 850,000
Operating Expenses	$ 820,000	(exclude Depreciation)
(Bal in Fig )
End. Bal	$ 110,000
	$ 930,000		$ 930,000
Note 3 :
To Find out Payment of Income Taxes :
Income Taxes Payable
		Beg .Bal	$ 55,000
Payment of Income	$ 105,000	Income tax Expenses	$ 80,000
Taxes (Bal in Fig )
End. Bal	$ 30,000
	$ 135,000		$ 135,000

Required 1 :
DIVERSIFIED PORTFOLIO CORPORATION
Statement of Cash Flow (Direct Method )
For the Year Ended December 31,2021
Cash Flows from Operating Activities :
Collections from Customers (See Note 1 )	$ 1,180,000
Payment of Operating Expenses (See Note 2 )	($820,000)
Payment of Income Taxes (See Note 3 )	($105,000)
Net Cash Flows From Operating Activities		$ 255,000
Cash Flows from Investing Activities :
Sales of Investments	$ 70,000
Net Cash flows from Investing Activities		$ 70,000
Cash Flows from Financing Activities :
Proceeds from issue of Common stock	$140,000
Payment of Dividends	($100,000)
Net Cash flows from Financing Activities		$ 40,000
Increase in Cash		$ 365,000
Cash and Cash Equivalents , January 1		$ 90,000
Cash and Cash Equivalents , December 31		$ 455,000

Required 2 :
DIVERSIFIED PORTFOLIO CORPORATION
Statement of Cash Flow (Partial )
For the Year Ended December 31,2021
Cash Flows from Operating Activities :
Net Income	$ 240,000
Adjustments for Non cash effects
Depreciation	$ 50,000
Changes in Operating Assets and Liabilities
Increase in Accounts receivable ($160,000 -$120,000)	($40,000)
Increase in Accrued Liabilities ($110,000 -$80,000)	$ 30,000
Decrease in Income taxes payable ($55,000 -$30,000)	($ 25,000)
Net Cash Flows From Operating Activities		$ 255,000