Prepare a statement of cash flows using the direct method

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Reference no: EM13581611

The comparative balance sheet of Charles Inc. for December 31, 2014 and 2013 is shown as follows:

	Dec. 31, 2014	Dec. 31, 2013
Assets
Cash	$469,320	439,440
Accounts Receivable (Net)	170,880	156,720
Inventories	481,320	462,840
Investments	0	180,000
Land	246,000	0
Equipment	528,840	414,840
Accum. Depreciation - Equipment	(124,800)	(111,000)
Total Assets	1,771,560	1,542,840
Liabilities & Stockholders' Equity
Accounts Payable (merchandise creditors)	318,360	303,720
Accrued expenses payable (operating exp)	31,680	39,480
Dividends payable	18,000	14,400
Common stock, $2 par	95,000	75,000
Paid-in-capital, excess of issue price over par - common stock	290,000	210,000
Retained Earnings	1,018,520	900,240
Total Liabilities & Stockholders Equity	1,771,560	1,542,840

The income statement for the year ended December 31, 2014, is as follows:

Sales		5,261,701
Cost of Merchandise Sold		3,237,970
Gross Profit		2,023,731
Operating Expenses
Depreciation Expense	13,800
Other Operating Expense	1,722,798
Total Operating Expenses		1,736,598
Operating Income		287,133
Other Income:
Gain on Sale of Investments		30,000
Income before Income Taxes		317,133
Income Tax Expense		126,853
Net Income		190,280

Additional data obtained from an examination of the accounts in the ledger for 2014 are as follows:

The investments were sold for $210,000 cash
Equipment and land were acquired for cash
There were no disposals of equipment during the year
The common stock was issued for cash
There was a $190,280 credit to retained earnings for net income
There was a $72,000 debit to retained earnings for cash dividends declared

Instructions:

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.

Reference no: EM13581611

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