Question

Statement of Cash Flows (Direct Method)

North Company’s income statement and comparative balance sheets as of December 31 of 2019 and 2018 follow:

NORTH COMPANY Income Statement For the Year Ended December 31, 2019
Sales Revenue		$770,000
Cost of Goods Sold	$550,000
Wages Expense	195,000
Advertising Expense	31,000
Depreciation Expense	24,000
Interest Expense	20,000
Gain on Sale of Land	(25,000)	795,000
Net Loss		$(25,000)

NORTH COMPANY Balance Sheets
	Dec. 31, 2019	Dec. 31, 2018
Assets
Cash	$80,000	$32,000
Accounts Receivable	42,000	49,000
Inventory	107,000	115,000
Prepaid Advertising	10,000	14,000
Plant Assets	360,000	210,000
Accumulated Depreciation	(80,000)	(56,000)
Total Assets	$519,000	$364,000
Liabilities and Stockholders’ Equity
Accounts Payable	$19,000	$25,000
Interest Payable	6,000	-
Bonds Payable	210,000	-
Common Stock	245,000	245,000
Retained Earnings	69,000	94,000
Treasury Stock	(30,000)	-
Total Liabilities and Stockholders’ Equity	$519,000	$364,000

During 2019, North sold land for $70,000 cash that had originally cost $45,000. North also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during 2019.
b. Prepare a statement of cash flows using the direct method.

Answer 1

Change in cash=80000-32000= 48000