Preparing the statement of cash flows from two balance sheets and an income statement
The 2011 and 2012 balance sheets and related income statement of Watson and Holmes Detective Agency follow:
|
2012 |
2011 |
|
|
BALANCE SHEET |
||
|
ASSETS |
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|
Cash |
$10,000 |
$ 6,000 |
|
Accounts receivable |
7,000 |
2,000 |
|
Less: Allowance for doubtful accounts |
1,000 |
(500) |
|
Inventory |
8,000 |
10,000 |
|
Long-lived assets |
12,000 |
11,000 |
|
Less: Accumulated depreciation |
4,000 |
(2,000) |
|
Total assets |
$32,000 |
$26,500 |
|
LIABILITIES AND SHAREHOLDERS” EQUITY |
||
|
Accounts payable |
$ 5,000 |
$6,000 |
|
Deferred revenues |
1,000 |
2,000 |
|
Long-term note payable |
10,000 |
10,000 |
|
Less: Discount on note payable |
(800) |
(1,000) |
|
Common stock |
12,000 |
6,000 |
|
Retained earnings |
4,800 |
3,500 |
|
Total liabilities and shareholders” equity |
$32,000 |
26,500 |
|
INCOME STATEMENT |
||
|
Revenues |
$42,000 |
|
|
Cost of goods sold |
24,000 |
|
|
Depreciation expense |
(2,000) |
|
|
Interest expense |
3,000 |
|
|
Bad debt expense |
(2,000) |
|
|
Other expense |
(9,000) |
|
|
Net income |
$2,000 |
REQUIRED:
Prepare a statement of cash flows under both the direct and indirect methods for 2012.