Data for Pat Metheny Company are presented in E23-11. Instructions Prepare a sta
ID: 2441751 • Letter: D
Question
Data for Pat Metheny Company are presented in E23-11.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
PAT METHENY COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2008 AND 2007
2008 2007
Cash $1,800 $1,150
Receivables 1,750 1,300
Inventory 1,600 1,900
Plant assets 1,900 1,700
Accumulated depreciation (1,200) (1,170)
Long-term investments (Held-to-maturity) 1,300 1,420
$7,150 $6,300
Accounts payable $1,200 $ 900
Accrued liabilities 200 250
Bonds payable 1,400 1,550
Capital stock 1,900 1,700
Retained earnings 2,450 1,900
$7,150 $6,300
PAT METHENY COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2008
Sales $6,900
Cost of goods sold 4,700
Gross margin 2,200
Selling and administrative expense 930
Income from operations 1,270
Other revenues and gains
Gain on sale of investments 80
Income before tax 1,350
Income tax expense 540
Net income 810
Cash dividends 260
Income retained in business $ 550
Explanation / Answer
Cash Flow from Operating Activities
Cash Collection from customers (1,300 + 6,900 – 1,750) 6,450
Less: Cash paid for merchandise 4,100
(1,600 + 4,700 – 1,900 + 900 – 1,200)
Cash paid for selling/admin. expenses 950
(250 + (930 – 30) – 200)
Income tax expense 540 5,590
Net cash provided by operating activities 860
Cash flows from investing activities
Sale of investment (1420- 1300+80) 200
Purchase of plant (1900 - 1700 -70) -130
Net cash provided by investing activities 70
Cash Flow from Financing activities
Issuance of capital stock 130
($1,900 – $1,700) – $70
Redemption of Bond -150
Cash dividends -260
Net cash used by financing activities -280
_______
Net Increase/Decrease in cash 650
Begining Cash Balance 1,150
Ending Cash Balance 1,800
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