The Diversified Portfolio Corporation provides investment advice to customers. A
ID: 2478586 • Letter: T
Question
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2013, appears below: Service revenue $ 1,040,000 Operating expenses 770,000 Income before income taxes 270,000 Income tax expense 54,000 Net income $ 216,000 The following balance sheet information also is available: 12/31/13 12/31/12 Cash $ 392,000 $ 77,000 Accounts receivable 134,000 107,000 Accounts payable (operating expenses) 84,000 67,000 Income taxes payable 17,000 29,000 In addition, the following transactions took place during the year: 1. Common stock was issued for $114,000 in cash. 2. Long-term investments were sold for $57,000 in cash. The original cost of the investments also was $57,000. 3. $87,000 in cash dividends was paid to shareholders. 4. The company has no outstanding debt, other than those payables listed above. 5. Operating expenses include $37,000 in depreciation expense. Required: 1. Prepare a statement of cash flows for 2013 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities. (Amounts to be deducted should be indicated with a minus sign) 2. Prepare the cash flows from operating activities section of Diversified’s 2013 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign)
Explanation / Answer
Ans) Diversified Portfolio Income Statement Service Revenue $ 1,040,000.00 Operating Expenses $ 770,000.00 Income before tax $ 270,000.00 Income Tax Expense $ 54,000.00 Net Income $ 216,000.00 Balance Sheet Information 31/12/2013 31/12/2012 Cash $ 392,000.00 $ 77,000.00 Accounts Receivables $ 134,000.00 $ 107,000.00 Accounts Payable(Operating Expense) $ 84,000.00 $ 67,000.00 Income Tax Payable $ 17,000.00 $ 29,000.00 Diversified Portfolio Statement of Cash Flow For The Year Ended Dec,31 2011 Cash Flow from operating Activities Collection from customers $ 1,013,000.00 Payment of operating expenses $ 716,000.00 Payment of Income Taxes $ 66,000.00 Net Cash inflows from operating activities $ 231,000.00 Cash Flows from investing activities Sales of Investments $ 57,000.00 Net cash inflows from investing activities $ 57,000.00 Cash Flows from Financing Activities Proceeds from issue of common stocks $ 114,000.00 Payment of Dividends $ 87,000.00 Net Cash inflows from financing activities $ 27,000.00 Increase in cash $ 315,000.00 Cash and cash equivalents, Jan 1st $ 77,000.00 Cash and cash equivalents, Dec 31st $ 392,000.00 Diversified Portfolio Statement of Cash Flows For the Year ended Dec 31,2011 Cash Flows from operating activities Net Income $ 216,000.00 Adjustments of non cash effects Depreciation Expense $ 37,000.00 Changes in operating assets and liabilities Increase in accounts receivables $ 27,000.00 Increase in accounts Payables $ 17,000.00 Decrease in income taxes payables $ 12,000.00 Net Cash inflows from operating activities $ 231,000.00 Working collection from customers Service Revenue $ 1,040,000.00 Less: Increase in Accounts Receivables $ 27,000.00 $ 1,013,000.00 Payment of operating Expenses Operating Expenses $ 770,000.00 less: Depreciation $ 37,000.00 Less:Increase in accounts payable $ 17,000.00 $ 716,000.00 Payment of Income Taxes Income tax expense $ 54,000.00 Plus: Income Tax Payable $ 12,000.00 $ 66,000.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.