Intermidiate Accounting II

18) The following information is reported on the comparative balance sheet and income statement of Cashwealth Corp for the year ended Dec 31, Year 8. Prepare the operating section of the statement of cash flows under BOTH the INDIRECT method AND the DIRECT method. (10 points for each method) BALANCE SHEET Year 8 Year 7 ASSETS Cash 25,000 30,000 Accounts Receivable 260,000 240,000 Merchandise Inventory 32,000 36,000 Prepaid Insurance 16,000 4,000 Equipment 25,000 50,000 Accumulated Depreciation (13,000 9.000) 345,000 351.000 LIABILITIES AND STOCKHOLDERS' EQUTY Accounts Payable 40,000 50,000 Salaries Payble 20,000 15,000 Bonds Payable 150,000 150,000 Premium on Bonds Payable 12,000 17,000 Common Stock 75,000 75,000 Retained Earnings 48,000 44,000 345,000 351,000 INCOME STATEMENT Additional information Sales 600,000 Dividends were declared and paid during year 8. Cost of goods sold (400,000) Accounts payable pertains to Inventory only Operating expenses (60,000) Operating expenses includes depreciation expense, Salaries Expense (100,000) Equipment costing $25,000 was sold for $20,000 cash Interest Expense (30,000) at a gain Gain on sale of equipment Net Income 15,000 5,000 DIRECT METHOD INDIRECT METHOD