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Statement of Cash Flows (Direct Method)

Andrews Inc., a greeting card company, had the following statements prepared as of December 31, 2010.

ANDREWS INC.
Comparative Balance Sheet
as of December 31, 2010 and 2009
12/31/10 12/31/09
Cash $ 5,819 $ 8,975
Accounts Receivable 61,872 48,801
Short-term investments (Available-for-sale) 35,033 18,107
Inventories 39,903 60,005
Prepaid rent 4,987 3,856
Printing equipment 154,070 129,520
Accumulated depr. -equipment (35,088) (24,828)
Copyrights 45,587 50,420
Total assets $312,183 $294,856

Accounts payable $ 45,946 $ 41,985
Income taxes payable 3,954 6,129
Wages payable 7,792 4,280
Short-term loans payable 8,012 9,979
Long-term loans payable 60,086 67,183
Common stock, $10 par 100,730 100,730
Contributed capital, common stock 29,100 29,100
Retained earnings 56,563 35,470
Total liabilities & equity $312,183 $294,856

ANDREWS INC.
Income Statement
For the Year Ended December 31, 2010
Sales $339,069
Cost of goods sold 175,500
Gross Margin 163,569
Operating expenses 120,410
Operating income 43,159
Interest expense $11,437
Gain on sale of equipment 1,793 9,644
Income before tax 33,515
Income tax expense 6,623
Net income $ 26,892
Additional information:
1. Dividends in the amount of $5,799 were declared and paid during 2010.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $29,380 and was 70% depreciated was sold during 2010.

Solution Summary

This solution illustrates how to prepare a statement of cash flows under the direct method.

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