Question

DIRECT Method
RichCorp
Income Statement
FYE 12/31/19
Revenues		445,000.00
Cost of Goods Sold	(232,500.00)
Operating Expenses	(110,500.00)
Interest Expense	(6,000.00)
Loss on sale of equipment	(1,000.00)	(350,000.00)
Income before income taxes		95,000.00
Income tax expense		(32,500.00)
Net Income		62,500.00
COMPARATIVE BALANCE SHEET
		12/31/2019	12/31/2018
Cash		27,000	18,500.00
Accounts Receivable		34,000	13,000.00
Inventory		27,000	-
Prepaid Insurance		2,000	3,000.00
Land		22,500	35,000.00
Buildings		100,000	100,000.00
Equipment		96,500	34,000.00
		309,000	203,500.00
Accumulated Depreciation, Buildings		10,500	5,500.00
Accumulated Depreciation, Equipment		14,000	5,000.00
Accounts Payable		16,500	20,000.00
Bonds Payable		55,000	75,000.00
Common Stock ($1 par)		110,000	30,000.00
Retained Earnings		103,000	68,000.00
		309,000	203,500.00

Additional Information relating to 2019 activities:
Cash dividends of $27,500 were declared and paid
Equipment costing $20,500 and having a carrying value of $18,000, was sold for $17,000 cash
Equipment with a cost of $83,000 was purchased for cash
Operating expenses include depreciation expense of $16,500 and amortization of prepaid expenses of $1,000
Land was sold at its book value for cash
Interest expense of $6,000 was paid in cash
Common stock was issued for cash
Inventory was purchased on credit
Assume operating expenses are paid in cash

PREPARE A CASH FLOW USING THE DIRECT METHOD

Answer 1

RichCorp
Statement of Cash flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Cash received from customers	$    424,000		445000+13000-34000
Cash paid to suppliers	$ (263,000)		232500+20000-16500+27000
Cash paid for operating expenses	$    (93,000)		110500-16500-1000
Cash paid for interest expenses	$       (6,000)
Cash paid for income tax expenses	$    (32,500)
Net cash used by operating activities		$    29,500
Cash flows from investing activities
Cash received from sale of Equipment	$       17,000
Cash paid for purchase of Equipment	$    (83,000)
Cash received from sale of Land	$       12,500
Net cash used by investing activities		$ (53,500)
Cash flows from financing activities
Repayment of bonds	$    (20,000)
Dividends paid	$    (27,500)
Cash received from issuance of common stock	$       80,000
Net cash provided by financing activities		$    32,500
Net Increase in cash		$       8,500
Cash and cash equivalents at beginning of period		$    18,500
Cash and cash equivalents at end of period		$    27,000