Prepare the statement of cash flows for richcorp using the direct method

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Prepare the statement of cash flows for richcorp using the direct method

RichCorp
Income Statement
FYE 12/31/20
Revenues
3,560,000
Cost of Goods Sold
(1,860,000)
Operating Expenses
(884,000)
Interest Expense
(48,000)
Loss on sale of equipment
(8,000)
(2,800,000)
Income before income taxes
760,000
Income tax expense
(260,000)
Net Income
500,000
Additional Information relating to 2020 activities:
Cash dividends of $220,000 were declared and paid
Equipment costing $164,000 and having a carrying value of $144,000, was sold for $136,000 cash
Equipment with a cost of $664,000 was purchased for cash
Operating expenses include depreciation expense of $132,000 and amortization of prepaid expenses of $8,000
Land was sold at its book value for cash
Interest expense of $48,000 was paid in cash
Common stock was issued for cash
Inventory was purchased on credit
Assume operating expenses are paid in cash
Transcribed Image Text:RichCorp Income Statement FYE 12/31/20 Revenues 3,560,000 Cost of Goods Sold (1,860,000) Operating Expenses (884,000) Interest Expense (48,000) Loss on sale of equipment (8,000) (2,800,000) Income before income taxes 760,000 Income tax expense (260,000) Net Income 500,000 Additional Information relating to 2020 activities: Cash dividends of $220,000 were declared and paid Equipment costing $164,000 and having a carrying value of $144,000, was sold for $136,000 cash Equipment with a cost of $664,000 was purchased for cash Operating expenses include depreciation expense of $132,000 and amortization of prepaid expenses of $8,000 Land was sold at its book value for cash Interest expense of $48,000 was paid in cash Common stock was issued for cash Inventory was purchased on credit Assume operating expenses are paid in cash
DIRECT METHOD
12/31/19
Debits
Credits
12/31/20
Cash
148,000
216,000
Accounts Receivable
104,000
272,000
Inventory
216,000
Prepaid Insurance
24,000
16,000
Land
280,000
180,000
Buildings
800,000
800,000
Equipment
272,000
772,000
1,628,000
2,472,000
Accumulated Depreciation, Buildings
44,000
84,000
Accumulated Depreciation, Equipment
40,000
112,000
Accounts Payable
160,000
132,000
Bonds Payable
600,000
440,000
Common Stock ($1 par)
240,000
880,000
Retained Earnings
544,000
824,000
1,628,000
2,472,000
Income Statement Section
Revenues
Cost of Goods Sold
Operating Expenses
Interest Expense
Loss on sale of equipment
Income tax expense
Net Income
Transcribed Image Text:DIRECT METHOD 12/31/19 Debits Credits 12/31/20 Cash 148,000 216,000 Accounts Receivable 104,000 272,000 Inventory 216,000 Prepaid Insurance 24,000 16,000 Land 280,000 180,000 Buildings 800,000 800,000 Equipment 272,000 772,000 1,628,000 2,472,000 Accumulated Depreciation, Buildings 44,000 84,000 Accumulated Depreciation, Equipment 40,000 112,000 Accounts Payable 160,000 132,000 Bonds Payable 600,000 440,000 Common Stock ($1 par) 240,000 880,000 Retained Earnings 544,000 824,000 1,628,000 2,472,000 Income Statement Section Revenues Cost of Goods Sold Operating Expenses Interest Expense Loss on sale of equipment Income tax expense Net Income
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