Preparing the statement of cash flows—direct method Diversion Rare Coins (DRC) was formed on January 1, 2018. Additional data for the year follow: On January 1, 2018, DRC issued no par common stock for $450,000. Early in January, DRC made the following cash payments: For store fixtures, $46,000 For merchandise inventory, $310,000 For rent expense on a score building, $18,000 Later in the year, DRC purchased merchandise inventory on account for $238,000. Before year-end, DRC paid $138,000 of this accounts payable. During 2018, DRC sold 2,700 units of merchandise inventory for $400 each. Before year-end, the company collected 85% of this amount. The cost of goods sold or the year was $340,000, and the ending merchandise inventory totaled $208,000. The store employs three people. The combined annual payroll is $97,000, of which DRC still owes $6,000 at year-end. Ac the end of the year, DRC paid an income tax of $18,000. There were no income taxes payable. Late in 2018, DRC paid cash dividends of $35,000. For store fixtures, DRC uses the straight-line depreciation method, over five years, with zero residual value. Requirements Prepare DRC’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 DRC’s balance sheet on December 31, 2018. Prepare DRCs 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

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

  • On January 1, 2018, DRC issued no par common stock for $450,000.
  • Early in January, DRC made the following cash payments:
  1. For store fixtures, $46,000
  2. For merchandise inventory, $310,000
  3. For rent expense on a score building, $18,000
  • Later in the year, DRC purchased merchandise inventory on account for $238,000. Before year-end, DRC paid $138,000 of this accounts payable.
  • During 2018, DRC sold 2,700 units of merchandise inventory for $400 each. Before year-end, the company collected 85% of this amount. The cost of goods sold or the year was $340,000, and the ending merchandise inventory totaled $208,000.
  • The store employs three people. The combined annual payroll is $97,000, of which DRC still owes $6,000 at year-end.
  • Ac the end of the year, DRC paid an income tax of $18,000. There were no income taxes payable.
  • Late in 2018, DRC paid cash dividends of $35,000.
  • For store fixtures, DRC uses the straight-line depreciation method, over five years, with zero residual value.

Requirements

  1. Prepare DRC’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 DRC’s balance sheet on December 31, 2018.
  3. Prepare DRCs statement of cash flows for the year ended December 31, 2018. Format cash flows from operating activities by the direct method.

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Other

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Please help

A: Overhead costs: The expenses that are not directly related to the manufacturing process are referred...

Q: Admitting New Partner With Bonus Cody Jenkins and Lacey Tanner formed a partnership to provide lands...

A: a. Capital balance of partner Jenkins and Tanner.

Q: Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor...

A: Requirement 1:Determine the Labor price per hour.

Q: On January 2, 2020, $100,000 of 11%, 10-year bonds were issued for $97,000. The $3,000 discount was ...

A: Prepare correcting entry:

Q: Equipment was purchased on January 2, 2020, for $24,000, but no portion of the cost has been charged...

A: Depreciation: Depreciation is the reduction in the value in a fixed asset due to natural factors lik...

Q: What are some reasons corporations issue stock dividends?

A: Stock Dividends: It refers to the payment of dividends by a company to its existing shareholders, in...

Q: Which of the following is false? a.    GAAP and IFRS have the same absolute standard regarding the r...

A: International Financial Reporting Standard (IFRS): An international standard for identifying, analyz...

Q: Prior to 2017, Heberling Inc. excluded manufacturingoverhead costs from work in process and finished...

A: Accounting error: Accounting errors can be defined as omission of the fundamental accounting princip...

Q: What is a stock dividend?

A: Dividends:Dividends are the distributions made to the owners of the company (stockholders) in the fo...