Statement of cash flows-direct method


Problem:

Andrews Inc., a greeting card company, had the following statements prepared as of December 31, 2010.

ANDREWS INC.
Comparative Balance Sheet
as of December 31, 2010 and 2009
12/31/10    12/31/09
Cash    $ 5,819    $ 8,975
Accounts Receivable    61,872    48,801
Short-term investments (Available-for-sale)    35,033    18,107
Inventories    39,903    60,005
Prepaid rent    4,987    3,856
Printing equipment    154,070    129,520
Accumulated depr. -equipment    (35,088)    (24,828)
Copyrights    45,587    50,420
Total assets    $312,183    $294,856

Accounts payable    $ 45,946    $ 41,985
Income taxes payable    3,954    6,129
Wages payable 7,792    4,280
Short-term loans payable    8,012    9,979
Long-term loans payable    60,086    67,183
Common stock, $10 par    100,730    100,730
Contributed capital, common stock    29,100    29,100
Retained earnings    56,563    35,470
Total liabilities & equity    $312,183    $294,856

ANDREWS INC.
Income Statement
For the Year Ended December 31, 2010
Sales    $339,069
Cost of goods sold    175,500
Gross Margin    163,569
Operating expenses    120,410
Operating income    43,159
Interest expense    $11,437
Gain on sale of equipment    1,793    9,644
Income before tax    33,515
Income tax expense    6,623
Net income    $ 26,892

Additional information:

1. Dividends in the amount of $5,799 were declared and paid during 2010.

2. Depreciation expense and amortization expense are included in operating expenses.

3. No unrealized gains or losses have occurred on the investments during the year.

4. Equipment that had a cost of $29,380 and was 70% depreciated was sold during 2010.

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Accounting Basics: Statement of cash flows-direct method
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