Statement of Cash Flows Under The Direct Method

1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. If an amount box does not require an entry, enter 0. 2. Prepare a statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2. Use a minus to indicate any decreases in cash or cash outflows. Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below: McGinnis Company Income Statement For Year Ended December 31, 20-2 Net sales $1,750,000 Cost of goods sold 890,000 Gross profit $860,000 Operating expenses 590,600 Operating income $269,400 Other revenues and expenses: Interest revenue $ 2,700 Interest expense (750) Gain on sale of office equipment 15,000 16,950 Income before taxes $286,350 Income tax expense 95,000 Net income $191,350 McGinnis Company Statement of Retained Earnings For Year Ended December 31, 20-2 Retained earnings, January 1, 20-2 $320,000 Net income $191,350 Less dividends 40,000 Net increase in retained earnings 151,350 Retained earnings, December 31, 20-2 $471,350 Additional information: 1. Office equipment was sold in 20-2 for $35,000. Additional information on the office equipment sold is provided below. Cost $100,000 Accumulated depreciation (80,000) Book value $20,000 Market value 35,000 Gain on sale $15,000 2. Depreciation expense for the year was $70,000. 3. The following purchases were made for cash: Store equipment $140,000 Delivery equipment 100,000 Office equipment 32,000 $272,000 4. Declared and paid cash dividends of $40,000. 5. Issued 10,000 shares of $10 par common stock for $22 per share. 6. Acquired additional office equipment by issuing a note payable for $8,000. McGinnis Company Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 INCREASE (DECREASE) Assets Current assets: Cash $103,420 $50,520 $52,900 Government notes 5,400 16,000 (10,600) Accrued interest receivable 830 580 250 Accounts receivable (net) 300,600 309,200 (8,600) Merchandise inventory 580,300 495,800 84,500 Supplies and prepayments 65,000 32,000 33,000 Total current assets $1,055,550 $904,100 151,450 Property, plant, and equipment: Store equipment $560,000 $420,000 140,000 Less accumulated depreciation-store equipment 120,000 440,000 90,000 310,000 30,000 Delivery equipment $430,000 $330,000 100,000 Less accumulated depreciation-delivery equipment 150,000 280,000 120,000 290,000 30,000 Office equipment $320,000 $380,000 (60,000) Less accumulated depreciation-office equipment 30,500 289,500 100,500 279,500 (70,000) Total property, plant, and equipment $1,009,500 $819,500 190,000 Total assets $2,065,050 $1,723,600 341,450 Liabilities Current liabilities: Notes payable $117,000 $109,000 8,000 Accounts payable 135,000 185,000 (50,000) Income tax payable 25,000 15,000 10,000 Accrued and withheld payroll taxes 15,800 13,400 2,400 Accrued interest payable 900 1,200 (300) Total current liabilities $293,700 $323,600 (29,900) Stockholders' Equity Common stock ($10 par, 400,000 shares authorized; Issued: 80,000 in 20-2 and 70,000 in 20-1) $800,000 $700,000 100,000 Paid-in capital in excess of par-common stock 500,000 380,000 120,000 Retained earnings 471,350 320,000 151,350 Total stockholders' equity 1,771,350 1,400,000 371,350 Total liabilities and stockholders' equity $2,065,050 $1,723,600 341,450