Question :
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the subsequent activity in the company's existing accounts:
20X5 20X4 Increase / Decrease)
Current assets
Cash $55,400 $35,200 $20,200
Accounts receivable (net) 83,800 88,000 -4,200
Inventory 243,400 233,800 9,600
Prepaid expenses 25,400 24,200 1,200
Current liabilities
Accounts payable $123,600 $140,600 ($17,000)
Taxes payable 43,600 49,200 -5,600
Interest payable 9,000 6,400 2,600
Accrued liabilities 38,800 60,400 -21,600
Note payable 44,000 - 44,000
The accounts payable were for the purchase of goods. Prepaid expenses and accrued liabilities relate to the firm's administrative and selling expenses. The company's condensed income statement as given.
SIGN GRAPHICS INC.
Income Statement for the Year Ended 31st December, 20x5
Sales $713,800
Less: Cost of goods sold 323,000
Gross profit $390,800
Less: Selling & administrative expenses $186,000
Depreciation expense 17,000
Interest expense 27,000 230,000
Add: gain on sale of land $160,800 21,800
Income before taxes $182,600
Income taxes 36,800
Net income $145,800
Other data:
1. Long-term investments were brought for cash at a cost of $74,600.
2. Cash proceeds from the sale of land totaled $76,200.
3. Store equipment of $44,000 was brought by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
4. A long-term note of $49,400 was repaid.
5. Twenty thousand shares of general stock were issued at $5.19 per share.
6. The company paid cash dividends amounting to $128,600.
Instructions:
a. Create the operating activities section of the company's statement of cash flows, considering use of:
1. The indirect method.
2. The direct method.
b. Prepare the financing and investing activities sections of the statement of cash flows.