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Cashflow - Indirect and Direct Method

Please help with attached cash flow question.

Income statement
2010 2009

Sales $880,000.00 $801,000.00
Cost of goods sold -$590,000.00 -$490,000.00
Gross profit $290,000.00 $311,000.00

Gain on disposal of assets $5,000.00
Loss on sale of long term investments -$4,000.00
Depreciation expenses -$33,000.00 -$29,000.00
Operating Expenses -$206,000.00 -$232,000.00
Interest Expenses -$10,000.00 -$14,000.00
Income Tax expenses -$18,000.00 -$15,000.00

Net Income $24,000.00 $21,000.00

Balance Sheet
2010 2009

Cash and equivalents $102,000.00 $92,000.00 $10,000.00
Accounts receivable $61,000.00 $65,000.00 -$4,000.00

Inventory $320,000.00 $340,000.00 -$20,000.00
Long-term investments $72,000.00 $100,000.00 -$28,000.00
Property, Plant & Equipment $450,000.00 $263,000.00 $187,000.00
Accumulated depreciation -$93,000.00 -$110,000.00 $17,000.00
$912,000.00 $750,000.00 $162,000.00

Accounts payable $130,000.00 $124,000.00 $6,000.00
Interest payable $10,000.00 $12,000.00 -$2,000.00
Income taxes payable $23,000.00 $8,000.00 $15,000.00
Long-term debt $65,000.00 $20,000.00 $45,000.00
Common shares, no par value $360,000.00 $250,000.00 $110,000.00
Preferred shares, 4%, cumulative, no par value $120,000.00 $150,000.00 -$30,000.00
Retained earnings $204,000.00 $186,000.00 $18,000.00
$912,000.00 $750,000.00 $162,000.00

During 2010, they sold capital assets with a net book value of $51,000 for $56,000.
Instructions:
a. Prepare a cash flow statement for the year ended December 31st, 2010 using the direct approach to report the operating activities.
b. Prepare the operating section using the indirect approach.

Attachments

Solution Preview

Please see the attached file(s) for the complete tutorial.

Income statement
2010 2009

Sales $880,000.00 $801,000.00
Cost of goods sold -$590,000.00 -$490,000.00
Gross profit $290,000.00 $311,000.00

Gain on disposal of assets $5,000.00
Loss on sale of long term investments -$4,000.00
Depreciation expenses -$33,000.00 -$29,000.00
Operating Expenses -$206,000.00 -$232,000.00
Interest ...

Solution Summary

The solution uses the indirect and direct method to provide the cash flow for the given data.

$2.19