Problem: Edwards, Inc. has prepared the following comparative balance sheets for 2003 and 2004:
2004 2003
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Cash $198,000 $102,000
Receivables 106,000 78,000
Inventory 100,000 120,000
Prepaid expenses 12,000 18,000
Plant assets 840,000 700,000
Accumulated depreciation (300,000) (250,000)
Patent 102,000 116,000
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$1,058,000 $884,000
Accounts payable $102,000 $112,000
Accrued liabilities 40,000 28,000
Mortgage payable --- 300,000
Preferred stock 350,000 ---
Additional paid-in capital--preferred 80,000 ---
Common stock 400,000 400,000
Retained earnings 86,000 44,000
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$1,058,000 $884,000
Questions:
1. The Accumulated Depreciation account has been credited only for the depreciation expense for the period.
2. The Retained Earnings account has been charged for dividends of $92,000 and credited for the net income for the year.
The income statement for 2004 is as follows:
Sales $1,320,000
Cost of sales 726,000
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Gross profit 594,000
Operating expenses 460,000
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Net income $ 134,000
Instructions:
(a) From the information above, prepare a statement of cash flows (indirect method) for Edwards, Inc. for the year ended December 31, 2004.
(b) From the information above, prepare a schedule of cash provided by operating activities using the direct method.