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5. Cash flow information: Direct and indirect methods ?The comparative year-end balance sheets of USA Graphics, Inc., revealed the following activity in the company’s current accounts: 20X8 20X7 Increase / Decrease) Current assets Cash $55,400 $35,200 $20,200 Accounts receivable (net) 83,800 88,000 -4,200 Inventory 243,400 233,800 9,600 Prepaid expenses 25,400 24,200 1,200 Current liabilities Accounts payable $123,600 $140,600 ($17,000) Taxes payable 43,600 49,200 -5,600 Interest payable 9,000 6,400 2,600 Accrued liabilities 38,800 60,400 -21,600 Note payable 44,000 — 44,000 The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm’s selling and administrative expenses. The company’s condensed income statement follows: USA GRAPHICS INC. Income Statement for the Year Ended December 31, 20X8 Sales $691,800 Less: Cost of goods sold 223,000 Gross profit $468,800 Less: Selling & administrative expenses $177,000 Depreciation expense 18,000 Interest expense 27,000 222,000 Add: gain on sale of land $246,800 18,800 Income before taxes $265,600 Income taxes 38,300 Net income $227,300 Other data: Long-term investments were purchased for cash at a cost of $64,200. Cash proceeds from the sale of land totaled $74,200. Store equipment of $34,000 was purchased by signing a short-term note payable. Also, a $140,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock. A long-term note of $42,200 was repaid. Twenty thousand shares of common stock were issued at $5.19 per share. The company paid cash dividends amounting to $125,000. Instructions: Prepare the operating activities section of the company’s statement of cash flows, assuming use of: The direct…
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