Additional Data: 1. The bonds were sold at par on July 1, 2014. 2. Cash dividend

Question

Additional Data:

1. The bonds were sold at par on July 1, 2014.

2. Cash dividends were paid.

3. Land was sold for $80,000.

4. Old equipment was sold for $70,000. This equipment had cost $150,000 and had accumulated depreciation of $60,000 to date of sale. New equipment was purchased to replace it.

Instructions

Prepare a statement of cash flows for calendar 2014, using the direct method.

TEXAS CORPORATION Comparative Statements of Financial Position December 31 2,014 2,013 Cash 43,000 24,000 Accounts Receivable, net 35,000 38,000 Inventory 114,000 82,000 Land 120,000 190,000 Building 200,000 200,000 Accumulated Depreciation -50,000 -40,000 Equipment 1,030,000 600,000 Accumulated Depreciation -118,000 -94,000 1,374,000 1,000,000 Accounts Payable (merch only) 115,000 100,000 Salaries Payable 20,000 0 4% Bonds Payable 300,000 0 Common Shares 750,000 750,000 Retained Earnings 189,000 150,000 1,374,000 1,000,000 TEXAS CORPORATION Income Statement for year end Dec 31, 2014 Sales 1,075,000 Cost of Goods Sold 640,000 Depreciation Expense 94,000 Salaries Expense 140,000 Rent Expense 72,000 Other Operating Expenses Inc Bond Interest 14,000 Net Loss on sale of assets 10,000 Income Taxes expense 21,000 Net Income 84,000

Explanation / Answer

TEXAS CORPORATION Cash flow statement (Direct Method) Dec.31,2014 Cash flow from Operating activities Cash received from customers $1,078,000 Cash paid for merchandise -$657,000 Cash paid to employees -$120,000 Cash paid for other expenses -$80,000 Cash paid for interest -$6,000 Cash paid for Income tax -$21,000 Net Cash provided by Operating activities $194,000 Cash flows from Investing activities Sale of Land $80,000 Sale of equipment $70,000 Purchase of equipment -$580,000 Net Cash used in investing activities -$430,000 Cash flow from Financing activities Bonds Issued $300,000 Dividend paid -$45,000 Net Cash provided (used) in Financing activities $255,000 Net increase (Decrease) in Cash $19,000 Beginning Cash balance $24,000 Ending cash balance $43,000 Working Cash dividend paid Retained Earnings 2013 $150,000 Add : Net Income $84,000 Less : Retained Earnings 2014 $189,000 Cash dividend paid $45,000 Cash collected from customers Accounts receivable 2013 $38,000 Add: Sales $1,075,000 Less : Accounts Receivables 2014 $35,000 Cash collected from customers $1,078,000 Cash paid for merchandise Inventory 2014 $114,000 Add : Accounts Payable 2013 $100,000 Add : Cost of goods sold $640,000 Less : Inventory 2013 $82,000 Less : Accounts Payable 2014 $115,000 Cash paid for merchandise $657,000 Cash paid to employees Salaries Payable 2013 $0 Add : Salaries Expenses $140,000 Less : Salaries Payable 2014 $20,000 Cash paid to employees $120,000 Interest on Bond Payable paid in cash = $300000 * 4% * (6 months / 12 months ) = $6000

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