Question

Problem 23-04

Sarasota Company had the following information available at the end of 2020.

SARASOTACOMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019
		2020			2019
Cash		$9,950			$4,010
Accounts receivable		20,550			12,960
Short-term investments		21,830			29,800
Inventory		42,340			35,030
Prepaid rent		2,990			12,090
Prepaid insurance		2,090			91
Supplies		990			75
Land		124,970			174,030
Buildings		353,000			353,000
Accumulated depreciation—buildings		(104,980	)		(86,810	)
Equipment		522,130			396,610
Accumulated depreciation—equipment		(128,890	)		(111,580	)
Patents		44,790			49,520
Total assets		$911,760			$868,826
Accounts payable		$21,970			$31,740
Income taxes payable		5,030			3,980
Salaries and wages payable		4,980			3,020
Short-term notes payable		10,080			10,080
Long-term notes payable		60,150			70,050
Bonds payable		396,540			396,540
Premium on bonds payable		23,170			27,926
Common stock		241,390			218,640
Paid-in capital in excess of par—common stock		25,100			17,500
Retained earnings		123,350			89,350
Total liabilities and stockholders’ equity		$911,760			$868,826

SARASOTA COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue					$1,170,900
Cost of goods sold					752,630
					418,270
Gross margin
Operating expenses
Selling expenses		$78,540
Administrative expenses		156,760
Depreciation/Amortization expense		40,210
Total operating expenses					275,510
Income from operations					142,760
Other revenues/expenses
Gain on sale of land		7,960
Gain on sale of short-term investment		4,000
Dividend revenue		2,380
Interest expense		(51,710	)		(37,370	)
Income before taxes					105,390
Income tax expense					39,370
Net income					66,020
Dividends to common stockholders					(32,020	)
To retained earnings					$34,000

Prepare a statement of cash flows for Sarasota Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale.

Answer 1