Question - Preparing the statement of cash flows direct method
The writing assignment income statement and additional data of Cobbs Hill, Inc., follow:
Cobbs Hill, Inc. Income Statement Year Ended April 30, 2010
Revenues:
Sales revenue....................... $232,000
Dividend revenue ................ 11,000 $243,000
Expenses:
Cost of goods sold .............. 108,000
Salary expense .................... 46,000
Depreciation expense .......... 31,000
Advertising expense ............ 11,500
Interest expense .................. 2,100
Income tax expense............. 9,000 207,600
Net income .............................. $ 35,400
Additional data:
a. Collections from customers are $13,000 more than sales.
b. Payments to suppliers are $1,300 less than the sum of cost of goods sold plus advertising expense.
c. Payments to employees are $2,000 more than salary expense.
d. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
e. Acquisition of plant assets is $143,000. Of this amount, $100,000 is paid in cash and $43,000 by signing a note payable.
f. Proceeds from sale of land total $28,000.
g. Proceeds from issuance of common stock total $93,000.
h. Payment of long-term note payable is $17,000.
i. Payment of dividends is $8,500.
j. Cash balance, April 30, 2009, was $21,000.
Requirements -
1. Prepare Cobbs Hill, Inc.s statement of cash flows and accompanying schedule of noncash investing and financing activities. Report operating activities by the direct method.
2. Evaluate Cobbs Hills cash flows for the year. In your evaluation, mention all three categories of cash flows and give the reason for your evaluation.