As the accountant at O'Donnell Industries, you are responsible for preparing the cash flow statement. You have decided to prepare the statement using the direct method and have gathered the following data from the accounting records:

Payment of long-term debt $200,000

Collections on accounts receivable 210,600

Acquisition of equipment by issuing

long-term note payable 85,000

Interest revenue 14,500

Credit sales 392,700

Loan collections 47,400

Cash received from sale of investments 36,100

Salary expense 103,800

Cash payments to purchase property, plant, and equipment 76,000

Cost of goods sold 417,300

Collection of interest revenue 13,700

Payment of cash dividends 48,500

Income tax expense and payments 39,200

Cash received from sale of property, plant, and equipment,

including $6,900 loss 31,800

Cash receipt of dividend revenue 19,300

Payments of salaries 94,100

Amortization expense 72,400

Cash sales 203,900

Cash received from issuance of common shares 300,000

Loan to another company 75,000

Interest expense and payments 60,400

Bonds payable converted into common shares 250,000

Payments to suppliers 294,700

Cash balance: December 31, 2013 55,500

Cash balance: December 31, 2014 30,400

Prepare the cash flow statement for the year ended December 31, 2014, using the direct method, and include a schedule of noncash investing and financing activities if necessary.

Problem Nine (10 Marks)

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.

Avatar Company

Balance Sheet

December 31, 2014

	2014	2013	Change
Cash	$ 21,000	$ 18,000	$ 3,000
Accounts receivable	31,000	35,000	(4,000)
Inventory	53,000	25,000	28,000
Property, Plant & Equipment (net)	120,000	90,000	30,000
Total assets	$ 225,000	$ 168,000	$ 57,000
Accounts payable	$ 4,000	$ 6,000	$ (2,000)
Accrued liabilities	2,000	1,000	1,000
Long-term notes payable	84,000	90,000	(6,000)
Total liabilities	$ 90,000	$ 97,000	$ (7,000)
Common shares	$ 42,000	$ 17,000	$ 25,000
Retained earnings	93,000	54,000	39,000
Total equity	$ 135,000	$71,000	$ 64,000
Total liabilities and equity	$ 225,000	$168,000	$ 57,000

Avatar Company

Income Statement

For the Year Ended December 31, 2014

Revenues and gains:
Sales revenue	$ 240,000
Interest revenue	1,000
Gain on sale of plant assets	4,000
Total revenues		$ 245,000
Expenses:
Cost of goods sold	$ 110,000
Salary expense	45,000
Amortization expense	12,000
Other operating expenses	23,000
Interest expense	1,000
Income tax expense	5,000
Total expenses		196,000
Net income		$ 49,000

Avatar Company

Statement of Retained Earnings

For the Year Ended December 31, 2014

Retained earnings, January 1, 2014	$ 54,000
Net income	49,000
Dividends	(10,000)
Retained earnings, December 31, 2014	$ 93,000

Additional information provided:

Equipment costing $52,000 was purchased for cash. investing outflow

Equipment with a net asset value of $10,000 was sold for $14,000 investing inflow

Depreciation expense of $12,000 was recorded during the year. -

During 2014, the company repaid $40,000 of long-term notes payable. - fin

During 2014, the company borrowed $34,000 on a new note payable - fin

There were no stock retirements during the year.

There were no sales of treasury stock during the year.

Prepare a statement of cash flows in good form assuming that Avatar Company uses the indirect method, and include a schedule of noncash investing and financing activities if necessary.