Question

Exercise 194

The financial statements of Lowz Company appear below:

LOWZ COMPANY Comparative Balance Sheet December 31
				2020			2019
		Assets
Cash				$36,000			$23,000
Accounts receivable				25,000			34,000
Merchandise Inventory				32,000			15,000
Property, plant, and equipment				50,000			78,000
Accumulated depreciation				(21,000	)		(24,000	)
Total				$122,000			$126,000
Liabilities and Stockholder's Equity
Accounts payable				$18,000			$23,000
Income taxes payable				9,000			8,000
Bonds payable				8,000			33,000
Common stock				28,000			24,000
Retained earnings				59,000			38,000
Total				$122,000			$126,000

LOWZ COMPANY Income Statement For the Year Ended December 31, 2020
Sales				$400,000
Cost of goods sold				270,000
Gross profit				130,000
Operating expenses				45,000
Income from operations				85,000
Interest expense				5,000
Income before income taxes				80,000
Income tax expense				24,000
Net income				$56,000

The following additional data were provided:
1.		Dividends declared and paid were $35,000.
2.		During the year, equipment was sold for $17,000 cash. This equipment cost $28,000 originally and had a book value of $17,000 at the time of sale.
3.		All depreciation expense is in the operating expenses.
4.		All sales and purchases are on account.
5.		Accounts payable pertain to merchandise suppliers.
6.		All operating expenses except for depreciation were paid in cash.

Prepare a statement of cash flows for Lowz Company using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1