Question

The Bennett Corporation provides you with the following information for the year ended 12/31/20:                                      
                                      
   Sales revenue               450,000                   
   Cost of goods sold               120,000                   
   Gross margin               330,000                   
   Depreciation expense           72,750                       
   Pension expense           28,500                       
   Other expense           38,250                       
   Interest expense           4,500                       
   Gain on the sale of equipment           (3,000)                      
   Income tax expense           97,500    238,500                   
   Net Income               91,500                   
                                      
               12/31/19       12/31/20              
   Cash           24,000        54,000               
   Accounts Receivable           75,000        70,500               
   Inventory           124,500        126,000               
   Equipment           127,500        123,000               
   Accumulated Depreciation           (9,000)       (10,500)              
       Total       342,000        363,000               
                                      
   Accounts Payable           54,000        69,000               
   Income Taxes Payable           99,000        72,000               
   Interest Payable           3,000        1,500               
   Notes Payable, long term           45,000        0               
   Accrued Pension Liability           6,000        3,000               
   Deferred Tax Liability           21,000        27,000               
   Common Stock, no par           105,000        120,000               
   Retained Earnings           9,000        70,500               
       Total       342,000        363,000               
                                      
                                      
Additional information:                                      
   Equipment costing $73,500 was sold. New equipment was purchased, and $15,000 of common stock was issued                                   
   in partial payment for the new equipment.                                  
                                      
Required: Prepare a Statement of Cash Flows for Bennett Corporation for 2020 using the direct method. (You must prepare all                                       
   supplementary schedules that would be required disclosures under the direct method.)  

Answer 1

Workings for direct method
Cash Received from customers	Amount $
Opening Accounts Receivable	75,000.00
Add: Sales	450,000.00
Less: Closing Accounts Receivable	70,500.00
Cash Received from customers	454,500.00
Inventory purchased
Cost of goods sold	120,000.00
Add: Closing Inventory	126,000.00
Less: Opening Inventory	124,500.00
Inventory purchased	121,500.00
Cash paid to suppliers
Opening Accounts Payable	54,000.00
Add: Purchases	121,500.00
Less: Closing Accounts Payable	69,000.00
Cash paid to suppliers	106,500.00
Pension Expense paid
Pension Expense	28,500.00
Add: Opening Pension Liability	6,000.00
Less: Closing Pension Liability	3,000.00
Pension Expense paid	31,500.00
Interest Expense paid
Interest Expense	4,500.00
Add: Opening Interest Payable	3,000.00
Less: Closing Interest Payable	1,500.00
Interest Expense paid	6,000.00
Income Tax paid
Income Tax Expense	97,500.00
Add: Opening Income Tax Payable	99,000.00
Add: Opening Deferred Tax Liability	21,000.00
Less: Closing Income Tax Payable	72,000.00
Less: Closing Deferred Tax Liability	27,000.00
Income Tax paid	118,500.00
Accumulated depreciation on equipment sold
Opening Accumulated Depreciation	9,000.00
Add: Depreciation expense	72,750.00
Less: Closing Accumulated Depreciation	10,500.00
Accumulated depreciation on equipment sold	71,250.00
Value of equipment sold
Cost of Equipment sold	73,500.00
Less: Accumulated depreciation	71,250.00
Add: Gain on sale	3,000.00
Value of equipment sold	5,250.00
Equipment purchased
Closing Balance	127,500.00
Add: Cost of Equipment sold	73,500.00
Less: Opening Balance	123,000.00
Equipment purchased	78,000.00
Less: Common Stock issued	15,000.00
Equipment purchased in cash	63,000.00
Dividend paid
Opening retained earnings	9,000.00
Add: Net income	91,500.00
Less: Closing retained earnings	70,500.00
Dividend paid	30,000.00

Bennet
Cashflow statement	Amount $	Amount $
Particulars
Cash flow from operating activities
Cash Received from customers		454,500.00
Less: Cash Payments
To Suppliers	106,500.00
Pension Expense paid	6,000.00
Other Expenses	38,250.00
Interest Expense paid	6,000.00
Income Tax paid	118,500.00
Operating Expenses	31,500.00	306,750.00
Net cash provided by operating activities		147,750.00
Cash flow from investing activities
Equipment sold	5,250.00
Equipment purchased	(63,000.00)
Net cash used for investing activities		(57,750.00)
Cash flow from financing activities
Common Stock issued	15,000.00
Notes payable paid	(45,000.00)
Dividends paid	(30,000.00)
Net cash used for financing activities		(60,000.00)
Net Increase/(Decrease) in cash		30,000.00
Cash Balance, beginning		24,000.00
Cash Balance, ending		54,000.00
Non cash activity	Amount $
Common stock issued against equipment	15,000.00