MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2014 AND 2013 2014 2013 Cash $10,860 $3,180 13,420 Accounts receivable 21,480 Short-term investments 21,350 31,200 Inventory 41,410 36,550 Prepaid rent Prepaid insurance Supplies 2,640 13,420 2,810 940 1,360 770 Land 124,560 172,800 Buildings Accumulated depreciation-buildings 350,170 350,170 (105,080) (88,410) Equipment 524,950 400,440 Accumulated depreciation-equipment (130,130) (113,160) 51,700 Patents 45,090 Total assets $911,470 $873,020 Accounts payable Income taxes payable Salaries and wages payable Short-term notes payable Long-term notes payable Bonds payable Premium on bonds payable Common stock Paid-in capital in excess of par-common stock $22,140 $31,620 5,600 4,210 5,810 3,940 10,310 10,310 60,880 70,430 400,420 400,420 16,324 25,220 240,200 219,670 25,956 17,880 Retained earnings Total liabilities and stockholders' equity 123,830 89,320 $911,470 $873,020 MICHAEL S COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECCEMBER 31, 2014 Sales revenue Cost of goods sold $1,160,530 748,380 412,150 Gross margin Operating expenses Selling expenses Administrative expenses $79,670 157,360 Depreciation/Amortization expense Total operating expenses Income from operations Other revenues/expenses 40,250 277,280 134,870 Gain on sale of land 8,970 Gain on sale of short-term investment 4,080 Dividend revenue 2,810 Interest expense (52,730 (36,870 Income before taxes 98,000 Income tax expense 39,450 Net income 58,550 Dividends to common stockholders (24,040) To retained earnings $34,510 Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a recondiliation schedule. Assume the short-term investments are classified as available-for-sale MICHAELS COMPANY Statement of Cash Flows For the Year Ended December 31, 2014 (Direct Method) Cash Flows from Operating Activities Cash receipts: Cash Received from Customers Dividends Received Cash payments Cash Paid to Suppliers Cash Paid for Operating Expenses Taxes Paid Interest Paid Net Cash Provided by Operating Activities Cash Flows from Investing Activities [Sale of Short-Term Investments Sale of Land Purchase of Equipment Net Cash Used by Investing Activities Cash Flows from Financing Activities Proceeds from Issuance of Common Stock Principal Payment on Long-Term Debt Dividends Paid Net Cash Used by Financing Activities Net Increase in Cash Cash, January 1, 2014 Cash, December 31, 2014 Reconciliation Schedule Reconciliation of Net Income to Net Cash Provided by Operating Activities Net Income 58,550 Adjustments to reconcile net income to Net Cash Provided by Operating Activities Increase in Income Taxes Payable Increase in Salaries and Wages Payable Increase in Accounts Receivable Depreciation/Amortization Expense 40,250 Decrease in Prepaid Rent Increase in Inventory Increase in Prepaid Insurance Increase in Supplies Decrease in Accounts Payable Gain on Sale of Land -8,970 Gain on Sale of Short-Term Investments -4,080 Amortization of Bond Premium Total Adjustments Net Cash Provided by Operating Activities | [ [