10) Use the following financial statements and additional information to (1) pre

Question

10) Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, 20X2 using the indirect method, (2) prepare only the cash flows from operating activities section of the statement of cash flows using the direct method and (3) compute the company's cash flow on total assets ratio for 20X2. Derby Company Balance Sheets At December 3 20X220X1 Assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Equipment Accumulated depreciation-Equipment 85,600S 65.20 157,750 144.850 80,600245,600 850 080 12.680 Total assets iabilities: [S $2.85015 45.4501 Accounts payable Income taxes pavable Total liabilities 136,890 Equity Common stock 200,000 150,000 ,000 Paid-in capital in excess of par Retained earnings Total equity 394.990 | S290.590 Total liabilities and equity Derby Company Income Statement For Year Ended December 31, 20X2 3488,000 st of goods sold Depreciation expense $212,540 3,000 106,260 ther nterest expense ther gains (losses): 400 68,200 Gain on sale of equipment ncome before taxes 124.500 ncome taxes expense Net income

Explanation / Answer

Answer 1. Derby Company Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 20X2 Cash Flow from opearating activities: Net Income (Loss)              83,400 Add/(Less) non cash effects on operating activities Depreciation expense: Delivery Equipment                  43,000 Gain on Sale of Equipment                  (4,700) Increase in Accounts Receivables               (16,100) Increase in Inventory               (12,900) Decrease in Prepaid Expenses                    6,600 Increase in Accounts Payable                    7,400 Increase in Income Tax Payable                    3,000              26,300 Net Cash provided by operating activities           109,700 Cash flow from Investing Activities Sale of Equipment                  29,700 Purchase of Equipment             (120,000) Cash Flow / (used) from Investing activities           (90,300) Cash Flow from Financing Activities Payment of Notes Payable (Long Term)               (20,000) Issue of Common Stock                  63,000 Cash dividend paid               (42,000) Cash Flow from Financing Activities                1,000 Net Increase / (Decrease) in Cash              20,400 Cash balance at the beginning Dec 31, 20X1              65,200 Cash balance at the end Dec 31, 20X2              85,600 Equipment Account Particulars Amt Particulars Amt To Balance B/f              245,600 By Cash (Bal Fig.)                29,700 To Gain on sale of equip. 4700 By Accumulated dep.                60,000 To Cash              120,000 By Balance C/f              280,600              370,300              370,300 Accumulated Dep. Particulars Amt Particulars Amt To Equipment (Bal Fig.)                60,000 By Balance b/f                97,600 To Balance C/f                80,600 By Dep. Exp.                43,000              140,600              140,600 Retained Earnings Particulars Amt Particulars Amt To Cash Dividends (Bal Fig)                42,000 By Balance b/f              100,590 By Net Income                83,400 To Balance C/f              141,990              183,990              183,990 Answer 2. Derby Company Cash flow Statement (Direct Method - Partial) For the Year ended Dec 31, 20X2 Cash Flow From opearting Activities Cash recd from Cutomers               471,900 Cash Paid for Merchandise             (218,040) Cash Paid for Operating Expenses               (99,660) Cash Paid for Interest                  (6,400) Cash Paid for Income Tax Expense               (38,100) Cash Flow from Operating Activities           109,700 Calculation of Cash Recd. From Customers Sales Revenue               488,000 Add: Op. Accounts Receivables - Dec 31, 20X1 - Net                  56,750 Total Due to Customers               544,750 Less: Cls. Accounts Receivable - Dec 31, 20X2 - Net               (72,850) Cash recd from Customers               471,900 Calculation of cash Paid to Suppliers Cost of Goods Sold               212,540 Add: Closing Inventory as on Dec 31,20X2               157,750               370,290 Less: opening Inventory - Dec 31, 20X1             (144,850) Purchases made during the year               225,440 Add: Opening Accounts Payable - Dec 31, 20X1                  45,450 Total amount Due               270,890 Less: Closing Accounts Payable - Dec 31, 20X2               (52,850) Cash payment for Mechandise               218,040 Calculation of Cash paid for Operating Expenses Operating Expenses               106,260 Add: Prepaid Expenses - Dec 31, 20X2                    6,080 Total Expenses Due               112,340 Less: Prepaid Expenses - Dec 31, 20X1               (12,680) Cash Paid for Operating Expenses                  99,660 Calculation of Cash paid for Income Tax Expense Income Tax Expense                  41,100 Add: Income Tax Payable - Dec 31, 20X1                  12,240 Total Due                  53,340 Less: Income Tax Payable - Dec 31, 20X2               (15,240) Cash Paid for Income Tax Expenses                  38,100

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