Share
Explore BrainMass

Solve: Statement of Cash Flows

I am having problems studying. Here is an example of the problems I am studying for my course next week.

Edwards, Inc. has prepared the following comparative balance sheets for 2003 and 2004:
2004 2003
---------- --------
Cash $198,000 $102,000
Receivables 106,000 78,000
Inventory 100,000 120,000
Prepaid expenses 12,000 18,000
Plant assets 840,000 700,000
Accumulated depreciation (300,000) (250,000)
Patent 102,000 116,000
---------- --------
$1,058,000 $884,000

Accounts payable $102,000 $112,000
Accrued liabilities 40,000 28,000
Mortgage payable --- 300,000
Preferred stock 350,000 ---
Additional paid-in capital--preferred 80,000 ---
Common stock 400,000 400,000
Retained earnings 86,000 44,000
---------- --------
$1,058,000 $884,000

Questions:
1. The Accumulated Depreciation account has been credited only for the depreciation expense for the period.
2. The Retained Earnings account has been charged for dividends of $92,000 and credited for the net income for the year.
The income statement for 2004 is as follows:
Sales $1,320,000
Cost of sales 726,000
----------
Gross profit 594,000
Operating expenses 460,000
----------
Net income $ 134,000

Instructions:
(a) From the information above, prepare a statement of cash flows (indirect method) for Edwards, Inc. for the year ended
December 31, 2004.
(b) From the information above, prepare a schedule of cash provided by operating activities using the direct method.

Solution Preview

The attached file has the workings:

a. In direct method: The cash flow statement has 3 section. Operating - this relates to the operations of the firm, changes in working capital. Investing - ...

$2.19