SCF-Direct and Indirect Methods
Comparative balance sheet accounts of Sharpe Company are presented below.
|
SHARPE COMPANY
COMPARATIVE BALANCE SHEET ACCOUNTS
As OF DECEMBER 31
|
|
Debit Balances
|
2014
|
2013
|
|
Cash
|
$ 70,000
|
$ 51,000
|
|
Accounts Receivable
|
155,000
|
130,000
|
|
Inventory
|
75,000
|
61,000
|
|
Investments (available-for-sale)
|
55,000
|
85,000
|
|
Equipment
|
70,000
|
48,000
|
|
Buildings
|
145,000
|
145,000
|
|
Land
|
40,000
|
25,000
|
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Totals
|
$610,000
|
$545,000
|
|
Credit Balances
|
|
|
|
Allowance for Doubtful Accounts
|
$ 10,000
|
$ 8,000
|
|
Accumulated Depreciation-Equipment
|
21,000
|
14,000
|
|
Accumulated Depreciation-Buildings
|
37,000
|
28,000
|
|
Accounts Payable
|
66,000
|
60,000
|
|
Income Taxes Payable
|
12,000
|
10,000
|
|
Long-Term Notes Payable
|
62,000
|
70,000
|
|
Common Stock
|
310,000
|
260,000
|
|
Retained Earnings
|
92,000
|
95,000
|
|
Totals
|
$610,000
|
$545,000
|
Additional data:
1. Equipment that cost $10,000 and was 60% depreciated was sold in 2014.
2. Cash dividends were declared and paid during the year.
3. Common stock was issued in exchange for land.
4. Investments that cost $35,000 were sold during the year.
5. There were no write-offs of uncollectible accounts during the year.
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Sales revenue
|
|
$950,000
|
|
Less: Cost of goods sold
|
|
600,000
|
|
Gross profit
|
|
350,000
|
|
Less: Operating expenses (includes depreciation expense and bad debt expense)
|
|
250,000
|
|
Income from operations
|
|
100,000
|
|
Other revenues and expenses
|
|
|
|
Gain on sale of investments
|
$15,000
|
|
|
Loss on sale of equipment
|
(3,000)
|
12,000
|
|
Income before taxes
|
|
112,000
|
|
Income taxes
|
|
45,000
|
|
Net income
|
|
$ 67,000
|
Instructions
(a) Compute net cash provided by operating activities under the direct method.
(b) Prepare a statement of cash flows using the indirect method.