Question

5. The accounting staff of Sparks INC has assembled the following information for the year ended December 31, 2019:

Cash Sales	$825,000
Credit sales	2,500,000
Collections on Account Receivable	2,200,000
Cash transferred from the money market fund to the general bank account	250,000
Interest and dividends received	100,000
Purchases all on account	1,800,000
Payments on accounts payable to merchandise suppliers	1,500,000
Cash payments for operating expenses	1,050,000
Interest paid	180,000
Income taxes paid	95,000
Loans made to borrowers	500,000
Collections on loans excl. receipts of interest	260,000
Cash paid to acquire plant assets	3,100,000
BV of plant assets sold	660,000
Loss on sales of plant assets	80,000
Proceeds from issuing bonds payable	2,500,000
Dividends paid	120,000
Cash and cash equivalents Jan 1	512,000

5.1. Prepare a statement of cash flows in the format Example below (Allison corporation) Place brackets around amounts representing cash outflows. Use the direct method of reporting cash flows from operating activities.

5.2. Some of the items above will be listed in your statement without change. However, you will have to combine certain given information to compute the amounts of
5.2.1. collections from customers,
5.2.2. cash paid to suppliers and employees, and

5.2.3. proceeds from sales of plant assets.
(Hint: Not every item listed is used in preparing a statement of cash flows.)

Answer 1

Sparks INC
Cash Flow Statement - Direct Method
For Year Ended December 31, 2019
Cash Flow from Operating Activities
Cash received from customers	3,025,000
Interest and dividend received	100,000
Cash provided by operating activities		3,125,000
Cash paid to suppliers & employees	(2,550,000)
Interest paid	(180,000)
Income taxes paid	(95,000)
Cash distributed for operating activities		(2,825,000)
Net cash flows operating activities		300,000
Cash Flow from Investing Activities
Loans made to borrowers	(500,000)
Collections on loans	260,000
Purchases of plant assets	(3,100,000)
Proceeds from sales of plant assets	580,000
Net cash flows investing activities		(2,760,000)
Cash Flow from Financing Activities
Proceeds from issuing bonds payable	2,500,000
Dividend paid	(120,000)
Net cash flows from financing activities		2,380,000
Net increase (decrease) in cash		(80,000)
Cash and cash equivalents, Jan 1, 2019		512,000
Cash and cash equivalents, Dec 31, 2019		432,000