Using financial statements to prepare a statement of cash flows— Direct method
The following financial statements were drawn from the records of Norton Materials, Inc.
Balance Sheets As of December 31 | ||||
| 2012 | 2011 | ||
Assets |
|
| ||
Cash | $ 94,300 | S 14,100 | ||
Accounts receivable | 36,000 | 40,000 | ||
Inventory | 72,000 | 64,000 | ||
Notes receivable (long-term) | 0 | 16,000 | ||
Equipment | 98,000 | 170,000 | ||
Accumulated depreciation—equipment | (47,800) | (94,000) | ||
Land | 46,000 | 30,000 | ||
Total assets | $298,500 | $240,100 | ||
Liabilities and equity |
|
| ||
Accounts payable | $ 24,000 | S 26,400 | ||
Salaries payable | 15,000 | 10,000 | ||
Utilities payable | 800 | 1,400 | ||
Interest payable | 0 | 1,000 | ||
Notes payable (long-term) | 0 | 24,000 | ||
Common stock | 150,000 | 110,000 | ||
Retained earnings | 108,700 | 67,300 | ||
Total liabilities and equity | $298,500 | $240,100 | ||
Income Statement For the year Ended December31,2012 |
| |||
Sales revenue | $300,000 |
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Cost of goods sold | (144,000) |
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Gross margin | 156,000 |
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Operating expenses |
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Salary expense | (88,000) |
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Depreciation expense | (9,800) |
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Utilities expense | (6,400) |
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Operating income | 51,800 |
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Nonoperating items |
|
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Interest expense | (2,400) |
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Loss on sale of equipment | (800) |
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Net income | $ 48,600 |
| ||
Additional Information
1. Sold equipment costing $72,000 with accumulated depreciation of $56,000 for $15,200 cash.
2. Paid a $7,200 cash dividend to owners.
Required
Analyze the data and prepare a statement of cash flows using the direct method.
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