Question

Statement of Cash Flows—Direct Method

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows:

		Dec. 31, 20Y6		Dec. 31, 20Y5
Assets
Cash		$258,870		$238,590
Accounts receivable (net)		93,780		85,690
Inventories		264,720		253,710
Investments		0		98,290
Land		135,780		0
Equipment		292,080		224,300
Accumulated depreciation		(68,380)		(60,490)
	Total assets	$976,850		$840,090
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$176,810		$165,500
Accrued expenses payable (operating expenses)		17,580		21,840
Dividends payable		9,770		7,560
Common stock, $10 par		52,750		41,160
Paid-in capital: Excess of issue price over par-common stock		198,300		114,250
Retained earnings		521,640		489,780
	Total liabilities and stockholders’ equity	$976,850		$840,090

The income statement for the year ended December 31, 20Y6, is as follows:

Sales					$1,580,790
Cost of goods sold					650,900
Gross profit					$929,890
Operating expenses:
	Depreciation expense		$7,890
	Other operating expenses		820,810
		Total operating expenses			828,700
Operating income					$101,190
Other expense:
		Loss on sale of investments			(26,540)
Income before income tax					$74,650
Income tax expense					23,890
Net income					50,760

Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $71,750 cash.

The common stock was issued for cash.

There was a $18,900 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Canace Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y6
Cash flows from operating activities:
Cash received from customers	$
Cash payments for merchandise
Cash payments for operating expenses
Cash payments for income taxes
Net cash flow from operating activities		$
Cash flows from investing activities:
Cash received from sale of investments	$
Cash paid for purchase of land
Cash paid for purchase of equipment
Net cash flow used for investing activities
Cash flows from financing activities:
Cash received from sale of common stock	$
Cash paid for dividends
Net cash flow from financing activities
Change in cash		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1