Reference no: EM132763378
Question - Comparative balance sheet accounts of Marcus Inc. are presented below.
MARCUS INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2020 AND 2019
December 31 Debit Accounts 2020 2019
Cash $42,000 $33,750
Accounts Receivable 70,500 60,000
Inventory 30,000 24,000
Equity investments 22,250 38,500
Machinery 30,000 18,750
Buildings 67,500 56,250
Land 7,500 7,500
$269,750 $238,750
Credit Accounts
Allowance for Doubtful Accounts $2,250 $1,500
Accumulated Depreciation-Machinery 5,625 2,250
Accumulated Depreciation-Buildings 13,500 9,000
Accounts Payable 35,000 24,750
Accrued Payables 3,375 2,625
Long-Term Notes Payable 21,000 31,000
Common Stock, no-par 150,000 125,000
Retained Earnings 39,000 42,625
$269,750 $238,750
Additional data (ignoring taxes):
1. Net income for the year was $42,500.
2. Cash dividends declared and paid during the year were $21,125.
3. A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized.
4. Equity investments (level of ownership is less than 20%) that cost $25,000 were sold during the year for $28,750. No unrealized gains and losses were recorded on these investments in 2020.
5. Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.
Marcus's 2020 income statement follows (ignoring taxes).
Sales revenue $540,000
Less: Cost of goods sold 380,000
Gross margin 160,000
Less: Operating expenses (includes $8,625 depreciation and $5,400 bad debts) 120,450
Income from operations 39,550
Other: Gain on sale of investments Loss on sale of machinery 2,950
Net income $42,500
Required -
(a) Compute net cash flow from operating activities using the direct method.
(b) Prepare a statement of cash flows using the indirect method.