Question -
The following information and financial statements excerpts pertain to Liquidity Inc.
a. All short term investments (securities available for sale) were purchased on 12/31/14 and sold during 2015.
b. The company entered a lease agreement on 12/31/15.
c. Fixed assets with a net book value of $15 were sold during the year.
d. The company repaid the current portion of long-term debt during the year.
e. Dividend was declared and partially paid.
2014 2015
Assets
Cash 54 45
Short term investments 95 0
Accounts receivable 45 85
Inventory 52 75
Prepaid general expenses 11 15
Fixed assets under capital lease, net 0 50
Fixed assets, net 165 228
422 498
Liabilities and stockowners' equity
Accounts payable 38 48
Wages payable 12 6
Tax payable 3 5
Dividend payable 0 4
Current portion of long term debt 10 12
Obligations under capital leases 0 50
Long term debt 183 180
Common stock 150 163
Retained earnings 26 30
422 498
2014 2015
Revenues, net 426
Cost of goods sold 310
Gross margin 116
General expenses 30
Wages expenses 42
Depreciation expense 24
Interest expense 11
Loss on sale of fixed assets 3
Gain on sale of securities available for sale -12
Tax expenses 8
106
Net income 10
1. Prepare the statement of cash flows for the year 2015 using the direct method.
2. Reconcile net income and net cash flows from operating activities for the year 2015.