Problem - Comparative balance sheets for Bayshore Industries, Inc. as of December 31 year 2 and year 1 are presented below. Prepare the cash from operations section of the statement of cash flows using the DIRECT method.
Bayshore Industries, Inc.
Balance Sheets
December 31, Year 2 and Year 1
Year 2 Year 1 Change
Assets
Current assets
Cash and cash equivalents $ 216,000 $ 144,000 $ 72,000
Trade receivables - net 3,434,000 1,971,000 1,463,000
Inventory 810,000 216,000 594,000
Prepaid expenses 18,000 -- 18,000
Total current assets 4,478,000 2,331,000 2,147,000
Property and equipment 7,780,000 7,740,000 40,000
Less: accumulated depreciation 576,000 455,000 121,000
Property and equipment - net 7,204,000 7,285,000 (81,000)
Intangibles, less accumulated amortization of $14,400 -
year 2 and $7,200 - year 1
21,600
28,800
(7,200)
Total assets $ 11,703,600 $ 9,644,800 $ 2,058,800
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 872,600 $ 396,800 $ 475,800
Line of credit 108,000 90,000 18,000
Current portion of long-term debt 29,000 27,000 2,000
Total current liabilities 1,009,600 513,800 495,800
Long-term debt 3,069,000 3,098,000 (29,000)
Total liabilities 4,078,600 3,611,800 466,800
Stockholders' equity
Common stock 9,000 9,000 0
Additional paid-in capital 5,400,000 5,400,000 0
Retained earnings 2,216,000 624,000 1,592,000
Total stockholders' equity 7,625,000 6,033,000 1,592,000
Total liabilities and stockholders' equity $ 11,703,600 $ 9,644,800 $ 2,058,800
Bayshore Industries, Inc.
Statement of Income and Retained Earnings
For the year ended December 31, Year 2
Net sales $ 19,800,000
Cost of sales 9,000,000
Gross profit on sales 10,800,000
Operating expenses
Selling expenses 3,600,000
General and administrative expenses 4,050,000
Other operating expenses 393,300
Total operating expenses 8,043,300
Operating income 2,756,700
Other income and expenses
Gain/loss on property and equipment disposals 18,000
Interest income 9,000
Interest expense (252,000)
Other income and expenses - net (225,000)
Income before income taxes 2,531,700
Provision for income taxes 759,700
Net income 1,772,000
Retained earnings - beginning 624,000
Dividends paid 180,000
Retained earnings - ending $ 2,216,000