Question

Prepare a statement of cash flow using the DIRECT METHOD. (please show all calculations)

		2017	2016
Assets:
Cash		140,000	60,000
Accounts receivable, net		87,000	65,000
Inventory		55,000	50,000
Prepaid expenses		12,000	20,000
Investments		70,000	20,000
Property, plant & equipment		660,000	500,000
Accumulated depreciation		(100,000)	(60,000)
Patents		16,000	20,000
Total Assets		940,000	675,000
Liabilities & Equity
Accounts payable		40,000	45,000
Accrued liabilities		15,000	20,000
Taxes payable		10,000	5,000
Long-term Notes Payable		100,000	50,000
Common stock		100,000	100,000
Additional paid in capital		290,000	260,000
Retained earnings		385,000	195,000
Total liabilities and equity		940,000	675,000
Sales		1,200,000
Cost of goods sold		650,000
Gross profit		550,000
Operating expenses		180,000
Pre-tax Operating income		370,000
Gain on sale of investments		10,000
Loss on sale of equipment		(5,000)
Pre-tax income		375,000
Income taxes		75,000
Net income		300,000
a. Stock option expense of $30,000 was recognized in 2017
b. Equipment of $200,000 was purchased using $50,000 note payable and cash
c. Equipment with cost of $40,000 and book value of $30,000 was sold for $25,000
d. Investments with a cost of $20,000 were sold for $30,000

Answer 1