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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 0 914,400 Inventories............................................... 1,394,40 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......................................... $1,080,000 $ 966,600 Accrued expenses payable................................ 67,800 79,200 Dividends payable.................................. 100,800 91,200 Common stock. $S 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 31, 20Y4, is as follows: Sales.......................................... $4,512,000 Cost of merchandise sold....................... 2,352,000 Gross profit.................................... $2,160,000 Operating expenses: Depreciation 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 20Y4 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

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 16.4BPR
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 0 914,400
Inventories............................................... 1,394,40 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......................................... $1,080,000 $ 966,600
Accrued expenses payable................................ 67,800 79,200
Dividends payable.................................. 100,800 91,200
Common stock. $S 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 31, 20Y4, is as follows:

Sales..........................................   $4,512,000
Cost of merchandise sold.......................   2,352,000
Gross profit....................................   $2,160,000
Operating expenses:    
Depreciation 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 20Y4 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.

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Chapter 16 Solutions

Accounting
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Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Adjustments to net incomeindirect method Ripley...Ch. 16 - Adjustments to net incomeindirect method Ya Wen...Ch. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Free cash flow Dillin Inc. reported the following...Ch. 16 - Cash flows from operating activities On its income...Ch. 16 - Effect of transactions on cash flows State the...Ch. 16 - Classifying cash flows Identify the type of cash...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting land transactions on statement of cash...Ch. 16 - Reporting stockholders equity items on statement...Ch. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Determining net income from net cash flow from...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash paid for merchandise purchases The cost of...Ch. 16 - Determining selected amounts for cash flows from...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Free cash flow Sweeter Enterprises Inc. has cash...Ch. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to PR...Ch. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Communication Tidewater Inc., a retailer, provided...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...

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