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Statement of cash flows—direct method The comparative balance sheet of Canace Products Inc. for December 31,20Y6 and 20Y5, Is as follows: Dec. 31, 20Y6 Dec. 31, 20Y5 Assets Cash.......................................................... $ 643,400 $ 679,400 Accounts receivable (net)....................................... 566,800 547,400 Inventories.................................................... 1,011,000 982,800 Investments................................................... 0 240,000 Land.......................................................... 520,000 0 Equipment............................................ 880,000 680,000 Accumulated depreciation...................................... (244,400) (200,400) Total assets................................................. 53,376,800 52,929,200 Liabilities and Stockholders' Equity Accounts payable.............................................. $ 771,800 5,748,400 Accrued expenses payable...................................... 63,400 70,800 Dividends payable.............................................. 8,800 6,400 Common stock, $2 par.......................................... $6,000 32,000 Paid-in capital: Excess of issue price over par—common stock..... 408,000 192,000 Retained earnings.............................................. 2,068,800 1,879,600 Total liabilities and stockholders' equity....................... 53,376,800 52,929,200 The income .statement for the- year ended December 31. 20Y6, is as follows: Sales............................................ $5,980,000 Cost of merchandise sold......................... 2,452,000 Gross profit...................................... $3,528,000 Operating expenses: Depreciation expense...................... $ 44,000 Other operating expenses..................... 3,100,000 Total operating expenses................... 3,144,000 Operating income....................................... $ 384,000 Other expense: Loss on sale of investments........................... (64,000) Income before income tax............................... 320,000 Income tax expense...................................... 102,800 Net income............................................. $ 217,200 Additional data obtained from an examination of the accounts in the ledger for 20Y6 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 $176,000 cash. d. The common stock was issued for cash. e. Tile re was a $28,000 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

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 16, Problem 16.4APR
Textbook Problem

Statement of cash flows—direct method

The comparative balance sheet of Canace Products Inc. for December 31,20Y6 and 20Y5, Is as follows:

  Dec. 31, 20Y6 Dec. 31, 20Y5
Assets    
Cash.......................................................... $ 643,400 $ 679,400
Accounts receivable (net)....................................... 566,800 547,400
Inventories.................................................... 1,011,000 982,800
Investments................................................... 0 240,000
Land.......................................................... 520,000 0
Equipment............................................ 880,000 680,000
Accumulated depreciation...................................... (244,400) (200,400)
Total assets................................................. 53,376,800 52,929,200
Liabilities and Stockholders' Equity    
Accounts payable.............................................. $ 771,800 5,748,400
Accrued expenses payable...................................... 63,400 70,800
Dividends payable.............................................. 8,800 6,400
Common stock, $2 par.......................................... $6,000 32,000
Paid-in capital: Excess of issue price over par—common stock..... 408,000 192,000
Retained earnings.............................................. 2,068,800 1,879,600
Total liabilities and stockholders' equity....................... 53,376,800 52,929,200

The income .statement for the- year ended December 31. 20Y6, is as follows:

Sales............................................   $5,980,000
Cost of merchandise sold.........................   2,452,000
Gross profit......................................   $3,528,000
Operating expenses:    
Depreciation expense...................... $ 44,000  
Other operating expenses..................... 3,100,000  
Total operating expenses................... 3,144,000
Operating income....................................... $ 384,000
Other expense:    
Loss on sale of investments...........................   (64,000)
Income before income tax............................... 320,000
Income tax expense......................................   102,800
Net income............................................. $ 217,200

Additional data obtained from an examination of the accounts in the ledger for 20Y6 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 $176,000 cash.

d. The common stock was issued for cash.

e. Tile re was a $28,000 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.

Expert Solution
To determine

Statement of cash flows

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

To prepare: The statement of cash flows using the direct method of presenting cash flows from operating activities.

Explanation of Solution

Working Notes:

Calculate the cash flows from operating activities.

Sales revenue $5,980,000
Less: Increase in accounts receivable (19,400)
Cash receipts from customers $5,960,600

Table (2) (1)

Calculate the cash payments for merchandise.

Cost of merchandise sold $2,452,000
Less: Increase in accounts payable (23,400)
Add: Increase in inventory 28,200
Cash payments for merchandise $2,456,800

Table (3) (2)

Calculate the cash payment for operating expenses...

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Chapter 16 Solutions

Accounting
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