PR 16-4B Statement of cash flows—direct method
The comparative balance sheet of Middaugh Restaurant Supplies Inc. for December 31, 2013 and 2012, is as follows:
| Dec. 31, 2013 | Dec. 31, 2012 | |
| Assets | ||
| Cash | $ 330,960 | $ 341,550 |
| Accounts receivable (net) | 496,320 | 457,200 |
| Inventories | 697,200 | 681,900 |
| Investments | 0 | 216,000 |
| Land | 480,000 | 0 |
| Equipment | 612,000 | 492,000 |
| Accumulated depreciation | (240,750) | (184,200) |
| $2,375,730 | $2,004,450 | |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable (merchandise creditors) | $ 540,000 | $ 483,300 |
| Accrued expenses payable (operating expenses) | 33,900 | 39,600 |
| Dividends payable | 50,400 | 45,600 |
| Common stock, $10 par | 108,000 | 15,000 |
| Paid-in capital in excess of par—common stock | 364,500 | 225,000 |
| Retained earnings | 1,278,930 | 1,195,950 |
| $2,375,730 | $2,004,450 |
The income statement for the year ended December 31, 2012, is as follows:
| Sales | $2,256,000 | |
| Cost of merchandise sold | 1,176,000 | |
| Gross profit | $1,080,000 | |
| Operating expenses: | ||
| Depreciation expense | $ 56,550 | |
| Other operating expenses | 672,420 | |
| Total operating expenses | 728,970 | |
| Operating income | $ 351,030 | |
| Other income: | ||
| Gain on sale of investments | 78,000 | |
| Income before income tax | $ 429,030 | |
| Income tax expense | 149,550 | |
| Net income | $ 279,480 |
The following additional information was taken from the records:
a. Equipment and land were acquired for cash.
b. There were no disposals of equipment during the year.
c. The investments were sold for $294,000 cash.
d. The common stock was issued for cash.
e. There was a $196,500 debit to Retained Earnings for cash dividends declared.
Instructions
Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
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