Question

Rowe Publishing Company

Balance Sheets

December 31, 2019 and 2018

1			2019		2018
2	Assets
3	Current assets:
4	Cash		$85,000.00		$66,000.00
5	Accounts receivable		240,000.00		231,000.00
6	Inventory		190,000.00		170,000.00
7	Total current assets		$515,000.00		$467,000.00
8	Property, plant, and equipment:
9	Building	$400,000.00		$400,000.00
10	Equipment	155,000.00		130,000.00
11		$555,000.00		$530,000.00
12	Accumulated depreciation	(375,000.00)		(350,000.00)
13	Net property, plant, and equipment		180,000.00		180,000.00
14	Total assets		$695,000.00		$647,000.00
15	LIABILITIES AND EQUITY
16	Current liabilities:
17	Accounts payable	$133,000.00		$121,000.00
18	Salaries payable	15,000.00		11,000.00
19	Income taxes payable	10,000.00		17,000.00
20	Total current liabilities		$158,000.00		$149,000.00
21	Long-term liabilities:
22	Notes payable	$115,000.00		$150,000.00
23	Bonds payable	50,000.00		0.00
24	Total long-term liabilities		165,000.00		150,000.00
25	Total liabilities		$323,000.00		$299,000.00
26	Equity:
27	Common stock	$300,000.00		$300,000.00
28	Retained earnings	72,000.00		48,000.00
29	Total equity		372,000.00		348,000.00
30	Total liabilities and equity		$695,000.00		$647,000.00

	Required:
	Prepare a statement of cash flows for 2019, using the direct method to determine net cash flow from operating activities.

Additional Information:

1.	No buildings or equipment were sold during 2019. Equipment was purchased for $25,000 cash.
2.	Notes payable in the amount of $35,000 were repaid during 2019.
3.	Bonds payable of $50,000 were issued for cash during 2019.
4.	Rowe Publishing declared and paid dividends of $35,000 during 2019.

Rowe Publishing Company

Income Statement

For the year ended December 31, 2019

1	Sales		$1,051,000.00
2	Less: Cost of goods sold		(578,000.00)
3	Gross margin		$473,000.00
4	Less operating expenses:
5	Salaries	$(351,000.00)
6	Depreciation	(25,000.00)	(376,000.00)
7	Income from operations		$97,000.00
8	Less: Interest expense		(16,000.00)
9	Income before taxes		$81,000.00
10	Less: Income taxes expense		(22,000.00)
11	Net income		$59,000.00

Answer 1

Rowe Publishing Company
Statement of Cash flows
For the Year Ended May 31, 2019
Cash flows from operating activities
Cash received from customers		$ 1,042,000
Cash payments
Cash paid to suppliers	$ (586,000)		578000+121000-133000+190000-170000
Cash paid for salaries and wages	$ (347,000)		351000+11000-15000
Cash paid for interest	$   (16,000)
Income taxes paid	-29000		22000+17000-10000
		$   (978,000)
Net cash provided by operating activities		$        64,000
Cash flows from investing activities
Cash paid for purchase of equipment	$   (25,000)
Net cash used by investing activities		$     (25,000)
Cash flows from financing activities
Dividend payments	$   (35,000)
Cash paid for repayment of notes	$   (35,000)
Cash received from issue of bonds	$      50,000
Net cash used by financing activities		$     (20,000)
Net Increase in cash and cash equivalents		$        19,000
Cash and cash equivalents at beginning of period		$        66,000
Cash and cash equivalents at end of period		$        85,000