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		$10,060			$4,000
Accounts receivable		20,520			12,890
Short-term investments		22,080			30,280
Inventory		41,830			34,940
Prepaid rent		3,020			11,990
Prepaid insurance		2,100			91
Supplies		1,000			75
Land		124,360			174,960
Buildings		349,270			349,270
Accumulated depreciation—buildings		(105,830	)		(87,870	)
Equipment		530,150			397,390
Accumulated depreciation—equipment		(131,220	)		(112,770	)
Patents		45,430			49,870
Total assets		$912,770			$865,116
Accounts payable		$22,060			$31,980
Income taxes payable		5,000			4,000
Salaries and wages payable		4,960			2,980
Short-term notes payable		9,920			9,920
Long-term notes payable		59,540			69,710
Bonds payable		403,870			403,870
Premium on bonds payable		19,410			20,646
Common stock		239,730			221,960
Paid-in capital in excess of par—common stock		25,160			17,490
Retained earnings		123,120			82,560
Total liabilities and stockholders’ equity		$912,770			$865,116

SARASOTA COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue					$1,167,020
Cost of goods sold					750,580
					416,440
Gross margin
Operating expenses
Selling expenses		$79,080
Administrative expenses		158,020
Depreciation/Amortization expense		40,850
Total operating expenses					277,950
Income from operations					138,490
Other revenues/expenses
Gain on sale of land		8,020
Gain on sale of short-term investment		3,960
Dividend revenue		2,390
Interest expense		(52,260	)		(37,890	)
Income before taxes					100,600
Income tax expense					39,110
Net income					61,490
Dividends to common stockholders					(20,930	)
To retained earnings					$40,560

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. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1