(SCF—Direct and Indirect Methods) Comparative balance sheet accounts of Sharpe Company are presented below.
|
SHARPE COMPANY |
||
|
Debit Balances |
2012 |
2011 |
|
Cash |
$ 70,000 |
$ 51,000 |
|
Accounts Receivable |
155,000 |
130,000 |
|
Inventory |
75,000 |
61,000 |
|
Investments (Available-for-sale) |
55,000 |
85,000 |
|
Equipment |
70,000 |
48,000 |
|
Buildings |
145,000 |
145,000 |
|
Land |
40,000 |
25,000 |
|
Totals |
$610,000 |
$545,000 |
|
Credit Balances |
||
|
Allowance for Doubtful Accounts |
$ 10,000 |
$ 8,000 |
|
Accumulated Depreciation—Equipment |
21,000 |
14,000 |
|
Accumulated Depreciation—Buildings |
37,000 |
28,000 |
|
Accounts Payable |
66,000 |
60,000 |
|
Income Taxes Payable |
12,000 |
10,000 |
|
Long-Term Notes Payable |
62,000 |
70,000 |
|
Common Stock |
310,000 |
260,000 |
|
Retained Earnings |
92,000 |
95,000 |
|
Totals |
$610,000 |
$545,000 |
Additional data:
1. Equipment that cost $10,000 and was 60% depreciated was sold in 2012.
2. Cash dividends were declared and paid during the year.
3. Common stock was issued in exchange for land.
4. Investments that cost $35,000 were sold during the year.
5. There were no write-offs of uncollectible accounts during the year.
Sharpe’s 2012 income statement is as follows.
|
Sales |
$950,000 |
|
|
Less: Cost of goods sold |
600,000 |
|
|
Gross profit |
350,000 |
|
|
Less: Operating expenses (includes depreciation expense and bad debt expense) |
250,000 |
|
|
Income from operations |
100,000 |
|
|
Other revenues and expenses |
||
|
Gain on sale of investments |
$15,000 |
|
|
Loss on sale of equipment |
(3,000) |
12,000 |
|
Income before taxes |
112,000 |
|
|
Income taxes |
45,000 |
|
|
Net income |
$ 67,000 |
Instructions
(a) Compute net cash provided by operating activities under the direct method.
(b) Prepare a statement of cash flows using the indirect method.