Problem 17-8A

Sheridan Ltd., a private company reporting under ASPE, reported the following for the years ended May 31, 2017 and 2016.

SHERIDAN LTD.

Balance Sheet

May 31Assets20172016Cash$29,675$46,250Accounts receivable87,95078,250Inventory182,000159,250Prepaid expenses5,7007,200Land133,25078,500Equipment317,000197,000Accumulated depreciation(75,200)(39,250)Total assets$680,375$527,200Liabilities and Shareholders' EquityAccounts payable$42,550$39,250Dividends payable7,2005,700Income taxes payable

2,9006,700Mortgage payable

129,00079,250Common shares217,500165,250Retained earnings281,225231,050Total liabilities and shareholders' equity$680,375$527,200

Additional Information:1.Profit for 2017 was $112,425.

2.Common shares were issued for $52,250.

3.Land with a cost of $52,250 was sold at a loss of $19,700.

4.Purchased land with a cost of $107,000 with a $57,250 down payment and financed the remainder with a mortgage note payable.

5.No equipment was sold during 2017.6.Net sales for the year were $674,400.

7.Cost of goods sold for the year was $400,600.

8.Operating expenses, including depreciation expense, were $98,500.

9.Interest expense was $5,700.10.Income tax expense was $37,475.

11.Accounts payable is used for merchandise purchases.

Prepare a cash flow statement for the year using the direct method.(Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

SHERIDANLTD.

Cash Flow Statement - Direct Method