Question

Comparative balance sheets and the income statements for Ellis Corporation are presented below:

Comparative Balance Sheet
	Ending Balance			Beginning Balance
Assets:
Current assets:
Cash and cash equivalents	$	49,500		$	32,400
Accounts receivable		38,800			41,200
Inventory		71,000			64,200
Total current assets		159,300			137,800
Long-term investments		175,000			214,000
Property, plant, and equipment		294,700			165,000
Less accumulated depreciation		56,200			52,000
Total assets	$	572,800		$	464,800
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	36,700		$	41,600
Accrued liabilities		25,200			31,800
Income taxes payable		15,300			21,000
Total current liabilities		77,200			94,400
Bonds payable		127,200			31,500
Total liabilities		204,400			125,900
Stockholders’ equity:
Common stock		309,800			280,800
Retained earnings		58,600			58,100
Total stockholders' equity		368,400			338,900
Total liabilities and stockholders' equity	$	572,800		$	464,800

Income Statement
Sales	$	156,000
Cost of goods sold		79,600
Gross margin		76,400
Selling and administrative expense		17,600
Net operating income		58,800
Loss on sale of investment		2,500
Income before taxes		56,300
Income taxes		22,700
Net income	$	33,600

The following additional information is available for the year:

* During the year, the company sold long-term investments for $36,500 that had been purchased for $39,000.

* The company did not sell any property, plant, and equipment during the year or repurchase any of its own common stock.

* All sales were on credit.

* The company paid a cash dividend of $33,100.

* The company paid cash to retire $15,600 of bonds payable.

Required:

a. Using the indirect method, determine the net cash provided by (used in) operating activities.

b. Using the direct method, determine the net cash provided by (used in) operating activities.

c. Using the net cash provided by (used in) operating activities amount from either part a or b, prepare a statement of cash flows.

Answer 1

	Cash flow indirect method
	Cash flow from operating activities
	Net income		33600
	Adjustments to reconcile the net income
	Depreciation and Amortization expense	4200
	Loss on sale of investment	2500
	Gain on sale of equipment
	Changes in current asset and liabilities
	Increase in prepaid insurance
	decrease in accounts receivable	2400
	Increase in inventory	-6800
	decrease in Accounts payable	-4900
	decrease in Income tax payable	-5700
	decrease in Acrrued liabilities	-6600
			-14900
	Cash generated from operations		18700
	Cash flow from Investing activities
	Equipment purchased	-129700
	Long term investment	36500
	Cash flow from Investing activities		-93200

	Cash flow from Financing activities
	Common stock	29000
	Dividend	-33100
	Bonds payable retired	-15600
	Bonds payable issued	111300
	Cash flow from Financing activities		91600
	Net Cash and cash equivalent		17100
Add	Beginning cash and cash equivalent		32400
	Ending cash and cash equivalent		49500

	Cash flow direct method
	Sales	156000
	Adjustments to a cash basis
	Accounts receivable as per last year	41200
	Accounts receivable as per this year	-38800	158400
Less	Cost of goods sold	79600
	Adjustments to a cash basis
	Inventory as per last year	-64200
	Inventory as per this year	71000
	Accounts payable as per last year	41600
	Accounts payable as per this year	-36700	91300
	Operating expense less depreciation(17600-4200)	13400
	Adjustments to a cash basis
	Prepaid expense last year
	Prepaid expense this year
	Accrued liabilities last year	31800
	Accrued liabilities this year	-25200	20000
	Income tax expense	22700
	Income tax payable last year	21000
	Income tax payable this year	-15300	28400
	Cash flow from operating activities		18700