Question
Operating activities portions of the statement of cash flows Indirect and direct methods (25 points) Comparative financial statements for Wing Company follow: Wing Company Balance
Operating activities portions of the statement of cash flows Indirect and direct methods (25 points)
Comparative financial statements for Wing Company follow:
Wing Company Balance Sheets
December 31, 2018 and 2019
Assets | 2018 | 2019 |
Current assets: |
|
|
Cash | $18,000 | $15,000 |
Accounts receivable | 25,000 | 22,000 |
Inventory | 22,000 | 20,000 |
Prepaid expenses | 10,000 | 14,000 |
Total current assets | 75,000 | 71,000 |
|
|
|
Longterm assets | 25,000 | 7,000 |
Property, plant, and equipment | 80,000 | 77,000 |
Less: Accumulated depreciation | (64,000) | (61,000) |
Net property, plant, and equipment | 16,000 | 16,000 |
Total assets | 116,000 | 94,000 |
|
|
|
Liabilities and Stockholders Equity |
|
|
Current liabilities: |
|
|
Accounts payable | $8,000 | 6,000 |
Accrued liabilities | 15,000 | 6,400 |
Total current assets | 23,000 | 12,400 |
Bonds payable | 18,000 | 12,000 |
Deferred income taxes | 15,000 | 4,000 |
Total liabilities | 56,000 | 28,400 |
Stockholders equity: |
|
|
Common stock | 20,000 | 30,000 |
Retained earnings | 40,000 | 35,600 |
Total stockholders equity | 60,000 | 65,600 |
Total liabilities and stockholders equity | $116,000 | $94,000 |
Wing Company Income Statement
For the year ended December 31, 2019
Sales | $70,000 |
Cost of goods sold | 40,000 |
Gross margin | 30,000 |
Depreciation expense | 5,000 |
Other operating expenses | 15,000 |
Net operating income | 10,000 |
Loss on sale of equipment | 4,000 |
Income before taxes | 6,000 |
Income tax expense | 2,400 |
Net income | $3,600 |
Additional data on activities during 2019 are as follows:
During 2019, Wing Company sold used equipment for $3,000 that had cost $15,000 with accumulated depreciation of $8,000.
. New equipment was purchased for $12,000 cash.
. Cash dividends totaling $8,000 were paid.
. Longterm investments that had cost $18,000 when purchased were sold for $18,000.
. Common stock was issued for $10,000.
Required:
A) Prepare the operating activities section of the statement of cash flows using the indirect method.
B)Prepare the operating activities section of the statement of cash flows using the direct method.
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