Preparing the statement of cash flows—direct method Boundary Rare Coins (BRC) was formed on January 1, 2018. Additional data for the year follow: On January 1, 2018, BRC issued no par common stock for $475,000. Early in January, BRC made the following cash payments: For store fixtures, $53,000 For merchandise inventory, $260,000 For rent expense on the store building, $13,000 Later in the year, BRC purchased merchandise inventory on account for $240,000. Before year-end, BRC paid $160,000 of this accounts payable. During 2018, BRC sold 2,200 units of merchandise inventory for $450 each. Before year-end, the company collected 85% of this amount The cost of goods sold for the year was $330,000, and ending merchandise inventory totaled $170,000. The store employs three people. The combined annual payroll is $80,000, of which BRC still owes $4,000 at year-end. At the end of the year, BRC paid an income tax of $24,000. There are no income taxes payable. Late in 2018, BRC paid cash dividends of $40,000. For store fixtures, BRC uses the straight-line depreciation method, over five years, with zero residual value. Requirements Prepare BRC’s income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together. Prepare the BRCs balance sheet on December 31, 2018. Prepare BRC’s statement of cash flows for the year ended December 31, 2018. Format cash flows from operating activities by the direct method.

Question

Preparing the statement of cash flows—direct method

Boundary Rare Coins (BRC) was formed on January 1, 2018. Additional data for the year follow:

  • On January 1, 2018, BRC issued no par common stock for $475,000.
  • Early in January, BRC made the following cash payments:
  1. For store fixtures, $53,000
  2. For merchandise inventory, $260,000
  3. For rent expense on the store building, $13,000
  • Later in the year, BRC purchased merchandise inventory on account for $240,000. Before year-end, BRC paid $160,000 of this accounts payable.
  • During 2018, BRC sold 2,200 units of merchandise inventory for $450 each. Before year-end, the company collected 85% of this amount The cost of goods sold for the year was $330,000, and ending merchandise inventory totaled $170,000.
  • The store employs three people. The combined annual payroll is $80,000, of which BRC still owes $4,000 at year-end.
  • At the end of the year, BRC paid an income tax of $24,000. There are no income taxes payable.
  • Late in 2018, BRC paid cash dividends of $40,000.
  • For store fixtures, BRC uses the straight-line depreciation method, over five years, with zero residual value.

Requirements

  1. Prepare BRC’s income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together.
  2. Prepare the BRCs balance sheet on December 31, 2018.
  3. Prepare BRC’s statement of cash flows for the year ended December 31, 2018. Format cash flows from operating activities by the direct method.

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