2. Prepare the SCF, using the direct method to present cash flows in the operating activities section. (Deductible amounts and Cash outflows should be indicated with minus sign.)
Financial statements for Discovery Company follow: 20X3 27,000 827,000 642,800 1,496,800 253,300 2,041,800 (1,482,900) 163,900 $ 2,472,900 DISCOVERY COMPANY Statement of Financial Position As of 31 December 20X4 Assets Current assets: Cash 31,000 Accounts receivable 862,900 Inventory 704,100 Total current assets 1,598,000 Land 586,600 Plant and equipment 2,949,900 Less: Accumulated depreciation (1,503,400) Patents 155,700 Total assets $ 3,786,800 Liabilities and shareholders' equity Liabilities: Current liabilities: Accounts payable 485,900 Salaries and wages payable 76,600 Income tax payable 179, 100 Total current liabilities 741,600 Long-term debt 1,858,500 Total liabilities 2,600,100 Shareholders' equity: Common shares, no-par 306,600 Retained earnings 880, 100 Total shareholders' equity 1,186,700 Total liabilities and shareholders' equity $ 3,786,800 $ 534,100 71,000 167,400 772,500 1,004,600 1,777,100 304,000 391,800 695,800 $ 2,472,900 6,247,400 DISCOVERY COMPANY Statement of Comprehensive Income For the year ended 31 December 20X4 Sales revenue Less expenses: Cost of goods sold $3,446,200 Selling and administrative expenses 920, 100 Depreciation and amortization 312,400 Rent expense 25,400 Miscellaneous expenses 240,500 Total expenses Other revenues and expenses: Interest expense 58,600 Gain on sale of equipment (10,000) Loss on debt retirement 18,400 Earnings before income tax Income tax expense Net earnings and comprehensive income 4,944,600 67,000 1,235,800 526,000 $ 709,800 Additional information: a. The company sold equipment that had an original cost of $492,800 and a net book value of $209,100. Other equipment was purchased for cash. Patent amortization was $8,200. b. Long-term debt with a face value of $820,000 was repaid during the year and other long-term debt was issued at a lower interest rate. c. The company issued shares for land during the period. Other common shares were retired (bought back and cancelled) at book value. d. Assume unexplained changes in accounts stem from logical transactions. 1. Prepare the SCF, using the indirect method. Use the two-step method for operations. (Deductible amounts and Cash outflows should be indicated with minus sign.) DISCOVERY COMPANY Statement of Cash Flows For the year ended 31 December 20X4 Operating activities: Adjustments for non-cash items: 0 Total adjustment Changes in net working capital: $ 0 Investing activities: Investing activities: 0 Financing activities: 0 Cash balance beginning of the year Cash balance end of the year $ 0 DISCOVERY COMPANY Statement of Cash Flows For the year ended 31 December 20X4 Operating activities: $ 0 Investing activities: 0 Financing activities: 0 Cash balance beginning of the year Cash balance end of the year $ 0
