Prepare the statement of cash flows under direct method

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Reference no: EM13848894

The Carpet Company's 19X2 and 19X1 balance sheets included the following items:

     12/31/2015

Debits

19X2($)

19X1($)

Cash .

10500

4000

Accounts receivable

8000

9000

Merchandise inventory

21000

18000

Equipment.

18000

15000

Totals

57500

46000

Credits

Accumulated depreciation, equipment 

4,000

3000

Accounts payable

7000

5000

Taxes payable

1000

2000

Dividends payable

1500

0

Common stock, $10 pay value

27000

25000

Contributed capital in excess of par, common stock

6000

5000

Retained earnings

11000

6000

Totals

57500

46000

The Carpet Company's income statement was as follows:

CARPET COMPANY

Income Statement

For the Year Ended December 31, 19X2

Sales

$61,000

Cost of goods sold

$40,000

Wages and other operating expenses

$6,300

Income tax expenses

$4,200

Depreciation expense

$1,500

$52,000

Net Income

$9,000

Required:

Prepare the statement of cash flows under both the direct method and the indirect method for the year ended December 31, 19X2.

Additional information includes the following:

a. Equipment costing $3,500 was purchased during the year

b. Fully depreciated equipment that cost $500 was discarded and its cost and accumulated depreciation were removed from the accounts.

c. Two hundred shares of stock were sold and issued at $15 per share

d. The company declared $4,000 of cash dividends and paid $2,500.

Reference no: EM13848894

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