Question

Monty Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

MONTY INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2017 AND 2016

               

                                                                                                                                               12/31/17           12/32/16                                                                                                                             

Cash                                                                                                                                        $6,000                 $7,000

Accounts receivable 61,800 50,700

Short-term debt investments (available-for-sale) 35,300 17,900

Inventory 39,800                  59,400

Prepaid rent                                                                                                                          4,900                      4,000

Equipment                                                                                                                             153,100              130,500

Accumulated depreciation—equipment (35,000)             (24,700)

Copyrights                                                                                                                             45,900                 50,500

Total assets                                                                                                                          $311,800            $295,300

Accounts payable                                                                                                               $46,000                $39,700

Income taxes payable                                                                                                            4,000                    5,900

Salaries and wages payable                                                                                                  8,100                     4,100

Short-term loans payable                                                                                                      8,100                  10,100

Long-term loans payable                                                                                                     59,900                   68,600

Common stock, $10 par                                                                                                      100,000                100,000

Contributed capital, common stock                                                                                   30,000                  30,000

Retained earnings                                                                                                                55,700                   36,900

Total liabilities & stockholders’ equity                                                                         $311,800             $295,300

MONTY INC.
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2017

Sales revenue                                                                                      $333,125

Cost of goods sold                                                                               173,600

Gross profit                                                                                            159,525

Operating expenses                                                                           118,900

Operating income                                                                                   40,625

Interest expense                                        $11,500

Gain on sale of equipment                          2,000                               9,500

Income before tax                                                                                  31,125

Income tax expense                                                                                6,225

Net income                                                                                             $24,900

Additional information:

1.		Dividends in the amount of $6,100 were declared and paid during 2017.
2.		Depreciation expense and amortization expense are included in operating expenses.
3.		No unrealized gains or losses have occurred on the investments during the year.
4.		Equipment that had a cost of $19,800 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1