Comparative balance sheets and the income statements for Ellis Company are presented below:
Ellis Company
Balance Sheets
December 31, Year 1 and Year 2
|
Year 2
|
Year 1
|
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash
|
$ 45,000
|
$ 30,000
|
|
Accounts receivable
|
38,000
|
40,000
|
|
Inventory
|
67,000
|
60,000
|
|
Total current assets
|
150,000
|
130,000
|
|
Long-term investments
|
162,000
|
200,000
|
|
Plant and equipment
|
278,000
|
150,000
|
|
Accumulated depreciation
|
(52,000)
|
(50,000)
|
|
Total assets
|
$538,000
|
$430,000
|
Liabilities and stockholders' equity
|
Current liabilities:
|
$ 36,000
|
$ 40,000
|
|
Accrued liabilities
|
24,000
|
30,000
|
|
Total current liabilities
|
60,000
|
70,000
|
|
Bonds payable
|
20,000
|
30,000
|
|
Mortgage payable
|
100,000
|
|
|
Deferred income taxes
|
15,000
|
20,000
|
|
Total liabilities
|
195,000
|
120,000
|
|
Stockholders' equity:
|
|
|
|
Common stock
|
295,000
|
270,000
|
|
Retained earnings
|
48,000
|
40,000
|
|
Total stockholders' equity
|
343,000
|
310,000
|
|
Total liabilities and stockholders' equity
|
$538,000
|
$ 430,000
|
Ellis Company
Income Statement
For the Year Ended December 31, Year 2
|
Sales
|
$150,000
|
|
Less cost of goods sold
|
76,500
|
|
Gross margin
|
73,500
|
|
Less operating expenses
|
16,000
|
|
Net operating income
|
57,500
|
|
Less loss on sale of investment
|
2,500
|
|
Income before taxes
|
55,000
|
|
Less income taxes
|
22,000
|
|
Net income
|
$ 33,000
|
Summary of transactions for Year2:
* During Year 2, the company sold for cash of $35,500 long-term investments with a cost of $38,000 when purchased.
* All sales were on credit.
* The company paid a cash dividend of $25,000.
* Bonds payable of $25,000 were retired by issuing common stock. The bonds retired were equivalent to the market value of the $25,000 stock issued.
* An addition to one of the company's buildings was completed on December 31, Year 2, at a cost of $128,000. The company gave an interest-bearing mortgage for $100,000 and paid $28,000 in cash.
* Bonds payable were sold for $15,000 cash at par value.
Required:
a. Using the indirect method, determine the net cash provided by operating activities for Year 2.
b. Using the direct method, determine the net cash provided by operating activities for Year 2.
c. Using the net cash provided by operating activities figure from either part a or b, prepare a statement of cash flows for Year 2.