Question

In: Accounting

The comparative balance sheet of MARC22 CO, for 2021 and the preceding year ended December 31, 2020 appears below in condensed form:

Please prepare Cash Flow Statement using direct Method of the Income Statement, using information from the attached document.

The comparative balance sheet of MARC22 CO, for 2021 and the preceding year ended December 31, 2020 appears below in condensed form:

Year

Year

2021

2020

Cash

$  45,000

$  53,500

Accounts receivable (net)

51,300

58,000

Inventories

147,200

135,000

Investments

0

60,000

Equipment

493,000

375,000

Accumulated depreciation-equipment

(113,700)

(128,000)

$622,800

$553,500

Accounts payable

$  61,500

$  42,600

Bonds payable, due 2024

0

100,000

Common stock, $10 par

250,000

200,000

Paid-in capital in excess of par--

  common stock

75,000

50,000

Retained earnings

  236,300

  160,900

$622,800

$553,500

The income statement for the current year is as follows:

Sales

$623,000

Cost of merchandise sold

348,500

Gross profit

$274,500

Operating expenses:

  Depreciation expense

$24,700

  Other operating expenses

75,300

100,000

Income from operations

$174,500

Other income:

  Gain on sale of investment

$  5,000

Other expense:

  Interest expense

  12,000

     (7,000)

Income before income tax

$167,500

Income tax

    64,100

Net income

$103,400

Additional data for the current year are as follows:

(a)

Fully depreciated equipment costing $39,000 was scrapped, no salvage, and equipment was purchased for $157,000.

(b)

Bonds payable for $100,000 were retired by payment at their face amount.

(c)

5,000 shares of common stock were issued at $15 for cash.

(d)

Cash dividends declared were paid $28,000.

(e)

All sales are on account.

Prepare a statement of cash flows, using the direct method of reporting cash flows from operating activities.

Decrease in cash

$   (8,500)

Cash at the beginning of the year

    53,500

Cash at the end of the year

$  45,000

Solutions

Expert Solution

Statement of Cash Flows - Direct Method
© www.excel-skills.com Amount
Cash flows from operating activities
Cash Receipts:
Cash receipts from customers (Wn1) $      6,29,700
Cash Payments:
Cash paid for Merchandise (WN2) $    -3,41,800
Cash Paid for Operating Expenses $       -75,300
Cash Paid for income taxes $       -64,100
Cash paid for interest expenses $       -12,000
Net cash from operating activities $   1,36,500
Cash flows from investing activities
Purchase of Equipment $    -1,57,000
Sale of investment $         65,000
Net cash used in investing activities $     -92,000
Cash flows from financing activities
Redumption of bonds payable $    -1,00,000
Issuance of common stock $         75,000
Payment of cash dividend $       -28,000
Net cash used in financing activities $     -53,000
Net increase in cash and cash equivalents $       -8,500
Cash and cash equivalents at beginning of period $      53,500
Cash and cash equivalents at end of period $      45,000
Working notes: 1
Calculation of cash collection from customer
Sales $           6,23,000
Add: Opening AR $              58,000
Less: Closing AR $              51,300
Cash Collected $           6,29,700
Working notes: 2
Calculation of purhcase of inventory
Cost of Goods Sold $           3,48,500
Add: Closing inventory $           1,47,200
Less : Opening Inventory $           1,35,000
Material Purhcased $           3,60,700
Calculation of amount paid to supplied
Op. Balance of Acct Payabl e $              42,600
Add: Purchases $           3,60,700
Less: Cl. Balance of Account payable $              61,500
Cash paid $           3,41,800

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