The comparative balance sheets of American-Davis Design Studio, Inc., at June 30, 2018, and 2017, and transaction data for fiscal 2018, are as follows:

Transaction data for the year ended June 30, 2018, follows:

a. Net income, $60,500

b. Depreciation expense on equipment, $13,000

c. Purchased a long-term investment with cash, $15,800

d. Sold land for $39,900, including a $7,100 loss

e. Acquired equipment by issuing a long-term note payable, $14,900

f. Paid off a long-term note payable, $60,800

g. Received cash for the issuance of common stock, $8,300

h. Paid cash dividends, $7,700

i. Paid off a short-term note payable by issuing common stock, $4,900

Requirements

1. Prepare the statement of cash flows of American-Davis Design Studio for the year ended June 30, 2018, using the indirect method to report operating activities. Also prepare the accompanying schedule of noncash investing and financing activities. All current account changes except for the short-term Notes Payable changes result from operating transactions.

2. Prepare a supplementary schedule showing cash flows from operations using the direct method. The accounting records provide the following: collections from customers, $254,300; interest received, $2,000; payments to suppliers, $147,200; payments to employees, $49,200; payments for income tax, $13,500; and payment of interest, $5,600.

Transcribed Image Text:

A1 American-Davis Design Studio, Inc. Comparative Balance Sheets June 30, 2018 Increase (Decrease) 2017 3 4 Current assets: Cash 19,000 $ 22,800 50,200 3,000 89,900 72,900 6,200 $ 312,000 $ 264,000 $ 48,000 $ 23,700 $ 48,400 98,300 1,900 42,900 74,800 22,000 4,700 25,600 48,100 (1,100) (47,000) 1,900 15,800 Accounts receivable Inventories Prepaid expenses 9 Land 10 Equipment, net 11 Long-term investment 12 13 Current liabilities: 6. Notes payable, short-term 15 $ 13,600 $ 29,600 13,000 55,700 3,500 4,500 52,100 65,800 74,200 18,500 $ 40,800 15,300 9,300 2,900 5,200 98,000 52,600 21,400 $ 312,000 $ 264,000 $ 48,000 14 (4,900) (11,200) (2,300) 46,400 600 Accounts payable 16 Income tax payable 17 Accrued liabilities Interest payable 19 18 Salary payable 20 Long-term note payable 21 Common stock 22 Retained earnings (700) (45,900) 13,200 52,800 23 24