1. Canyoupleasehelpmewiththisone?
2. Cashflowinformation:DirectandindirectmethodsThecomparativeyear-endbalancesheetsofSignGraphicsInc.revealedthefollowingactivityinthecompany'scurrentaccounts:20X520X4Increase (decrease)CurrentassetsCash$55,400$35,200$20,200Accountsreceivable(net)86,80088,000(4,200)Inventory246,400233,8009,600Prepaidexpenses25,40024,2001,200CurrentliabilitiesAccountspayable$126,600$140,600$(17,000)Taxespayable46,60049,200(5,600)Interestpayable9,0006,4002,600Accruedliabilities38,80060,400(21,600)Notepayable44,00044,000Theaccountspayablewereforthepurchaseofmerchandise.Prepaidexpensesandaccruedliabilitiesrelatetothe firm'ssellingandadministrativeexpenses.Thecompany'scondensedincomestatementfollows:SIGNGRAPHICSINC. IncomeStatement fortheYearEndedDecember31,20X5Sales$728,000Less:Costofgoodssold323,000Grossprofit$390,800Less:Selling&administrativeexpenses$186,000Depreciationexpense17,000Interestexpense27,000230,000Add:Gainonsaleofland$160,80021,800Incomebeforetaxes$182,600Incometaxes36,800Netincome$160,000Otherdata:
   2. Long-terminvestmentswerepurchasedforcashatacostof$77,600.
   3. Cashproceedsfromthesaleoflandtotaled$79,200.
   4. Storeequipmentof$47,000waspurchasedbysigningashort-termnotepayable.
   6. Also,a$153,000 telecommunicationssystemwasacquiredbyissuing3,000sharesofpreferredstock.
   7. Along-termnoteof$50,900wasrepaid.
   8. 21,500sharesofcommonstockwereissuedat$5.19pershare.
   9. Thecompanypaidcashdividendsamountingto$128,600.
   Instructions
   2. Preparetheoperatingactivitiessectionofthecompany'sstatementofcashflows,assuminguseof 1)thedirectmethod2)theindirectmethod.
   3. Preparetheinvestingandfinancingactivitiessectionsofthestatementofcashflows.

	Solution
Prepare the operating activities section of the statement of cash flows by using the direct method.
Cash collected
Less cash paid for:
Inventory
Selling & administrative
Interest expense
Income taxes
Net cash provided by operating activities
Prepare the operating activities section of the statement of cash flows by using the indirect method.
Net income
Accounts receivable
Inventory
Prepaid expenses
Accounts payable
Taxes payable
Interest payable
Accrued liabilities
Gain on sale of land
Depreciation
Net cash provided by operating activities
Prepare the investing and financing activities sections of the statement of cash flows.
Cash flows from investing activities
Purchase of long-term investments
Proceeds from sale of land
Net cash provided by investing act.
Cash flows from financing activities
Repayment of long-term note
Issuance of common stock*
Dividends paid
Net cash used by financing activities
* 20,000 shares X $5.19 = $103,800
Note: The store equipment and telecommunications system transactions would be reported as noncash investing/ financing activities