Reference no: EM132583960
Preparation of statement of cash flows (direct method)
Horse Ltd. has prepared the following comparative statements of financial position at December 31, 2016 and 2017: Horse Ltd.adheres to ASPE.
2017 2016
Cash....................................................................................... $ 99,000 $ 51,000
Accounts receivable............................................................... 53,000 39,000
Inventory................................................................................. 50,000 60,000
Prepaid expenses................................................................... 6,000 9,000
Property, plant & equipment................................................... 420,000 350,000
Accumulated depreciation...................................................... (150,000) (125,000)
Goodwill.................................................................................. 51,000 58,000
$529,000 $442,000
Accounts payable................................................................... $ 51,000 $ 56,000
Accrued liabilities.................................................................... 20,000 14,000
Mortgage payable................................................................... - 150,000
Preferred shares..................................................................... 215,000 -
Common shares..................................................................... 200,000 200,000
Retained earnings.................................................................. 43,000 22,000
$529,000 $442,000
1. The Accumulated Depreciation account has been credited only for the depreciation expense for the year. There were no disposals of property, plant and equipment, but new equipment was purchased during 2017.
2. Depreciation expense and a charge for impairment of goodwill have both been included in operating expenses.
3. The Retained Earnings account was debited for cash dividends declared and paid of $46,000, and credited for the net income for the year.
The condensed income statement for 2017 is as follows:
Sales............................................................................. $660,000
Cost of sales................................................................. 363,000
Gross profit.................................................................... 297,000
Operating expenses...................................................230,000
Net income.................................................................... $ 67,000
Instructions
Question 1: From the information above, prepare statement of cash flows (direct method) for calendar 2017.