Statement of Cash Flows—Direct Method The comparative balance sheet of Rucker Ph

Question

Statement of Cash Flows—Direct Method

The comparative balance sheet of Rucker Photography Products Inc. for December 31, 2014 and 2013, is as follows:

The income statement for the year ended December 31, 2014, is as follows:

The following additional information was taken from the records:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $85,580 cash.

The common stock was issued for cash.

There was a $22,600 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, and decreases in cash.

Dec. 31, 2014 Dec. 31, 2013 Assets Cash $304,150 $284,560 Accounts receivable (net) 110,180 102,200 Inventories 311,030 302,590 Investments 0 117,230 Land 159,530 0 Equipment 343,170 267,520 Accumulated depreciation-equipment (80,340) (72,140) Total $1,147,720 $1,001,960 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $207,740 $197,390 Accrued expenses payable (operating expenses) 20,660 26,050 Dividends payable 11,480 9,020 Common stock, $10 par 61,980 49,100 Paid-in capital in excess of par-common stock 232,990 136,270 Retained earnings 612,870 584,130 Total $1,147,720 $1,001,960

Explanation / Answer

Answer:

Statement of cash flow Particulars Amount ($) Cash flows from operating activities: 51340 Net Income Items to reconcile net income to cash flows from operating activities: Add back depreciation expense 8200 Add: Loss on sale of investments 31650 Increase in accounts receivable -7980 Increase in inventories -8440 Increase in accounts payable 10350 Decrease in accrued expenses -5390 Increase in dividends payable 2460 Net cash flows from operating activities 51920 82190 Cash flows from investing activities: Cash received from sale of investments 85,580 Cash paid to acquire land -159,530 Cash paid to acquire equipment -75650 Net cash flows from investing activities -149,600 Cash flows from financing activities: Cash received from issuance of common stock 109600 Cash used to pay dividends -22,600 Net cash flows from financing activities 68000 87000 Net increase in cash 19,590 Cash balance January 1, 2014 284,560 Cash balance December 31, 2014 304,150

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