Statement of cash flows — direct method The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows: Dec. 31, 20Y4 Dec. 31, 20Y3 Assets Cash $ 661,920 $ 683,100 Accounts receivable (net) 992,640 914,400 Inventories 1,394,400 1,363,800 Investments 0 432,000 Land 960,000 0 Equipment 1,224,000 984,000 Accumulated depreciation—equipment (481,500) (368,400) Total assets $4,751,460 $4,008,900 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $1,080,000 $ 966,600 Accrued expenses payable (operating expenses) 67,800 79,200 Dividends payable 100,800 91,200 Common stock, $5 par 130,000 30,000 Paid in capital: Excess of issue price over par—common stock 950,000 450,000 Retained earnings 2,422,860 2,391,900 Total liabilities and stockholders' equity $4,751,460 $4,008,900 The income Statement for the year ended December 51. 20Y3. is as follows: Sales $4,512,000 Cost of goods sold 2,352,000 Gross profit $2,160,000 Operating expenses: Depredation expense $ 113,100 Other operating expenses 1,344,840 Total operating expenses 1,457,940 Operating income $ 702,060 Other income: Gain on sale of investments 156,000 Income before income tax $ 858,060 Income tax expense 299,100 Net income $ 558,960 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: A. Equipment and land were acquired for cash. B. There were no disposals of equipment during the year. C. The investments were sold for $588,000 cash. D. The common stock was issued for cash. E. There was a $528,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.

BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

Solutions

Chapter 13, Problem 13.4BPR
Textbook Problem

Statement of cash flows — direct method

The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows:

  Dec. 31, 20Y4 Dec. 31, 20Y3
Assets    
Cash $ 661,920 $ 683,100
Accounts receivable (net) 992,640 914,400
Inventories 1,394,400 1,363,800
Investments 0 432,000
Land 960,000 0
Equipment 1,224,000 984,000
Accumulated depreciation—equipment (481,500) (368,400)
Total assets $4,751,460 $4,008,900
Liabilities and Stockholders' Equity    
Accounts payable (merchandise creditors) $1,080,000 $ 966,600
Accrued expenses payable (operating expenses) 67,800 79,200
Dividends payable 100,800 91,200
Common stock, $5 par 130,000 30,000
Paid in capital: Excess of issue price over par—common stock 950,000 450,000
Retained earnings 2,422,860 2,391,900
Total liabilities and stockholders' equity $4,751,460 $4,008,900

The income Statement for the year ended December 51. 20Y3. is as follows:

Sales   $4,512,000
Cost of goods sold 2,352,000
Gross profit   $2,160,000
Operating expenses:    
Depredation expense $ 113,100  
Other operating expenses 1,344,840  
Total operating expenses   1,457,940
Operating income   $ 702,060
Other income:    
Gain on sale of investments   156,000
Income before income tax   $ 858,060
Income tax expense   299,100
Net income   $ 558,960

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

  1. A. Equipment and land were acquired for cash.
  2. B. There were no disposals of equipment during the year.
  3. C. The investments were sold for $588,000 cash.
  4. D. The common stock was issued for cash.
  5. E. There was a $528,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.

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Chapter 13 Solutions

Corporate Financial Accounting
Ch. 13 - Classifying cash flows Identify whether each of...Ch. 13 - Adjustments to net incomeindirect method Ripley...Ch. 13 - Changes in current operating assets and...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Land transactions on the statement of cash flows...Ch. 13 - Common stock transactions on the statement of cash...Ch. 13 - Free cash flow Dillin Inc. reported the following...Ch. 13 - Appendix 2 Cash received from customersdirect...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Cash flows from operating activitiesnet loss...Ch. 13 - Effect of transactions on cash flows Slate the...Ch. 13 - Classifying cash flows Identify the type of cash...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting land transactions on statement of cash...Ch. 13 - Determining cash payments to stockholders The...Ch. 13 - Reporting stockholders' equity items on statement...Ch. 13 - Reporting land acquisition for cash and mortgage...Ch. 13 - Reporting issuance and retirement of long-term...Ch. 13 - Determining net income from net cash flow from...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method List the...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Determining selected amounts for cash flows from...Ch. 13 - Cash flows from operating activities direct method...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsdirect method The...Ch. 13 - Statement of cash flows direct method applied to...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows indirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows direct method The...Ch. 13 - Statement of cash flowsdirect method applied to PR...Ch. 13 - Free Cash Flow Analyze and compare Amazon.com,...Ch. 13 - Analyze and compare Apple, Coca-Cola, and Verizon...Ch. 13 - Analyze Aeropostale Aeropostale, Inc. (AROPQ) is a...Ch. 13 - Analyze and compare ATT and Facebook ATT Inc. (T)...Ch. 13 - Analyze Priceline The Priceline Group Inc. (PCLN)...Ch. 13 - Ethics in Action Head Donuts Inc. is a retailer of...Ch. 13 - Communication Tidewater Inc., a retailer, provided...Ch. 13 - Using the statement of cash flows You are...

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