This question was posted yesterday... the responses (all) provided for requireme
ID: 2539310 • Letter: T
Question
This question was posted yesterday... the responses (all) provided for requirement 1 was incorrect... I am reposting for assistance....
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2018, appears below
Service revenue
$
920,000
Operating expenses
710,000
Income before income taxes
210,000
Income tax expense
84,000
Net income
$
126,000
The following balance sheet information also is available:
12/31/18
12/31/17
Cash
$
284,000
$
71,000
Accounts receivable
122,000
101,000
Accounts payable (operating expenses)
72,000
61,000
Income taxes payable
11,000
17,000
In addition, the following transactions took place during the year:
Common stock was issued for $102,000 in cash.
Long-term investments were sold for $51,000 in cash. The original cost of the investments also was $51,000.
$81,000 in cash dividends was paid to shareholders.
The company has no outstanding debt, other than those payables listed above.
Operating expenses include $31,000 in depreciation expense.
Required:
1. Prepare a statement of cash flows for 2018 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities.
2. Prepare the cash flows from operating activities section of Diversified’s 2018 statement of cash flows using the indirect method.
Service revenue
$
920,000
Operating expenses
710,000
Income before income taxes
210,000
Income tax expense
84,000
Net income
$
126,000
Explanation / Answer
1)Statement of cash flows for 2018 for the Diverified Portfolio Corporation
Direct Method
2) Statement of cash flows for 2018 of Diversified Portfolio Corporation - Indirect Method
Cash flow from Operating Activities Cash generated from operations- Service Revenue $920,000 Operating Expenses ($710,000) Income tax paid ($840,00) Net cash from operating activities $126,000 Cash flows from Investing Activities Sale of Investments $51,000 Net cash from investing activities $51,000 Cash flow from Financing Activities Proceeds from issuance of common stock $102,000 Dividends Paid ($81,000) Net cash from financing activities $21,000 Net increase in cash and cash equivalents $199,000 Cash and cash equivalents at the beginning of the period $71,000 Cash and cash equivalents at the end of the period $284,000Related Questions
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