P23.8 (LO 2, 4) (SCFDirect and Indirect Methods) Comparative balance sheet accounts of Sharpe Company are presented below.

Sharpe Company

Comparative Balance Sheet Accounts

As of December 31

Debit Balances 2020 2019

Cash $70,000 $51,000

Accounts Receivable 155,000 130,000

Inventory 75,000 61,000

Debt investments (available-for-sale) 55,000 85,000

Equipment 70,000 48,000

Buildings 145,000 145,000

Land 40,000 25,000

Totals $610,000 $545,000

Credit Balances

Allowance for Doubtful Accounts $10,000 $8,000

Accumulated DepreciationEquipment 21,000 14,000

Accumulated DepreciationBuildings 37,000 28,000

Accounts Payable 66,000 60,000

Income Taxes Payable 12,000 10,000

Long-Term Notes Payable 62,000 70,000

Common Stock 310,000 260,000

Retained Earnings 92,000 95,000

Totals $610,000 $545,000

Additional data:

a. Equipment that cost $10,000 and was 60% depreciated was sold in 2020.

b. Cash dividends were declared and paid during the year.

c. Common stock was issued in exchange for land.

d. Debt investments that cost $35,000 were sold during the year.

e. There were no write-offs of uncollectible accounts during the year.

Sharpe's 2020 income statement is as follows.

Sales revenue $950,000

Less: Cost of goods sold 600,000

Gross profit 350,000

Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000

Income from operations 100,000

Other revenues and expenses

Gain on sale of investments $15,000

Loss on sale of equipment (3,000) 12,000

Income before taxes 112,000

Income taxes 45,000

Net income $67,000

Instructions

a. Compute net cash provided by operating activities under the direct method.

b. Prepare a statement of cash flows using the indirect method.

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