Using financial statements to prepare a statement of cash flows— Direct method
The following financial statements were drawn from the records of Raceway Sports:
Balance Sheets As of December31 | ||
| 2012 | 2011 |
Assets |
|
|
Cash | $123,600 | $ 28,200 |
Accounts receivable | 57,000 | 66,000 |
Inventory | 126,000 | 114,000 |
Notes receivable (long-term] | 0 | 30,000 |
Equipment | 147,000 | 255,000 |
Accumulated depreciation-equipment | (74,740) | (141,000) |
Land | 82,500 | 52,500 |
Total assets | $461,360 | $404,700 |
Liabilities and equity |
|
|
Accounts payable (inventory) | $ 42,000 | $ 48,600 |
Salaries payable | 30,000 | 24,000 |
Utilities payable | 600 | 1,200 |
Interest payable | 0 | 1,800 |
Notes payable (long-term) | 0 | 60,000 |
Common stock | 300,000 | 240,000 |
Retained earnings | 88,760 | 29,100 |
Total liabilities and equity | $461,360 | $404,700 |
Income Statement For the Year Ended December 31,2012 | |
Sales revenue - | $580,000 |
Cost of goods sold | (288,000) |
Gross margin | 292,000 |
Operating expenses |
|
Salary expense | (184,000) |
Depreciation expense | (17,740) |
Utilities expense | (12,200) |
Operating income | 78,060 |
Nonoperating items |
|
Interest expense | (3,000) |
Loss on the sale of equipment | (1,800) |
Net income | S 73,260 |
Additional Information
1. Sold equipment costing $108,000 with accumulated depreciation of $84,000 for $22,200 cash.
2. Paid a $ 13,600 cash dividend to owners.
Required
Analyze the data and prepare a statement of cash flows using the direct method.
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