Income Statement and Statement of Cash Flows—Indirect Method
Refer to the data for Novations, Inc., in Problem 5 47.
Instructions:
1. Prepare an income statement for Novations, Inc., for the year ended December 31,2008.
2. Prepare a statement of cash flows for the year ended December 31, 2008, using the indirect method.
Problem 5 47
Statement of Cash Flows—Direct Method
The table on page 267 shows the account balances of Novations, Inc., at the beginning and end of the company’s accounting period.
|
Debits |
Dec 31, 2008 |
Jan 1, 2008 |
|
Cash and Cash Equivalents |
$176,400 |
$ 58,000 |
|
Accounts Receivable |
32,000 |
26,600 |
|
Inventory |
21,000 |
25,400 |
|
Prepaid Insurance |
5,600 |
4,000 |
|
Long Term Investments (at cost) |
6,000 |
16,800 |
|
Equipment |
80,000 |
66,000 |
|
Treasury Stock (at cost) |
10,000 |
20,000 |
|
Cost of Goods Sold |
368,000 |
|
|
Operating Expenses |
185,000 |
|
|
Income Tax Expense |
37,600 |
|
|
Loss on Sale of Equipment |
1,000 |
|
|
Total debits |
$922,600 |
$216,800 |
|
Credits |
Dec 31, 2008 |
Jan 1, 2008 |
|
Accumulated Depreciation—Equipment |
$ 19,000 |
$ 18,000 |
|
Accounts Payable |
7,000 |
11,200 |
|
Interest Payable |
1,000 |
2,000 |
|
Income Taxes Payable |
12,000 |
8,000 |
|
Notes Payable—Long Term |
16,000 |
24,000 |
|
Common Stock |
110,000 |
100,000 |
|
Paid In Capital in Excess of Par |
32,000 |
30,000 |
|
Retained Earnings |
19,600* |
23,600 |
|
Sales |
704,000 |
|
|
Gain on Sale of Long Term Investments |
2,000 |
|
|
Total credits |
$922,600 |
$216,800 |