Question

The Carpet Company’s 2019 and 2020 balance sheets included the following items:

	December 31
	2020	2019
Debits
Cash	$10,500	$ 4,000
Accounts receivable	8,000	9,000
Merchandise inventory	21,000	18,000
Equipment	18,000	15,000
Totals	$57,500	$46,000
Credits
Accumulated depreciation, equipment	$ 4,000	$ 3,000
Accounts payable	7,000	5,000
Taxes payable	1,000	2,000
Dividends payable	1,500	0
Common stock, $10 par value	27,000	25,000
Contributed capital in excess of par, common stock	6,000	5,000
Retained earnings	11,000	6,000
Totals	$57,500	$46,000

The Carpet Company’s income statement was as follows:

CARPET COMPANY Income Statement For the Year Ended December 31, 2020
Sales		$61,000
Cost of goods sold	$40,000
Wages and other operating expenses	6,300
Income taxes expense	4,200
Depreciation expense	1,500	52,000
Net income		$ 9,000

Required:

Prepare the statement of cash flows under both the direct method and the indirect method for the year ended December 31, 2020. Additional information includes the following:

1. Equipment costing $3,500 was purchased during the year.
2. Fully depreciated equipment that cost $500 was discarded and its cost and accumulated depreciation were removed from the accounts.
3. Two hundred shares of stock were sold and issued at $15 per share.\
4. The company declared $4,000 of cash dividends and paid $2,500.

Answer 1

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Accumulated Depreciation By Bal. old 38000 1500 To a Equipment Balold 500 4000 Bin Depreciation 4500 4500 - Common Stock co 3 Зорь 25000 27000 By Cash (200810) 2000 27000 T To Bul old 27050 Contributed Capital in excess of par By Bal bld 6000 By Cash (20085) 6002 - To bal old 1000 GOOO To Dividend payable Dividend 4000 Expenes By Income Slatime wooo To To Dividend 2500 13700 nooo payable By Batbold Bividend 4000 canh Balold CS #canned with CamScanner

Note Accounts Dr. B To To Receivable 9000 By 61000 By Bal bld sales 62000 Cash Bal eld Ics Scanned with 70,000 70000 SamScanner

of Calculaton Purch are Purchares. Op. Inu + COGS + (18000) + 60000 $th $43.000 Cl. Inventa + 21000 = Accounts Payable By 41000 By 7000 To Cash To Bal 5000 7000 43000 Bal blc Purchase cld cerrsh Sdanned with Im Scanner

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