Question
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2016, appears below: Service revenue $
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2016, appears below:
Service revenue | $ | 1,260,000 |
Operating expenses | 880,000 | |
Income before income taxes | 380,000 | |
Income tax expense | 76,000 | |
Net income | $ | 304,000 |
The following balance sheet information also is available: |
12/31/16 | 12/31/15 | |||
Cash | $ | 486,000 | $ | 61,000 |
Accounts receivable | 156,000 | 118,000 | ||
Accounts payable (operating expenses) | 106,000 | 78,000 | ||
Income taxes payable | 28,000 | 51,000 | ||
In addition, the following transactions took place during the year: | |
1. | Common stock was issued for $136,000 in cash. |
2. | Long-term investments were sold for $68,000 in cash. The original cost of the investments also was $68,000. |
3. | $98,000 in cash dividends was paid to shareholders. |
4. | The company has no outstanding debt, other than those payables listed above. |
5. | Operating expenses include $48,000 in depreciation expense. |
Required: | |
1. | Prepare a statement of cash flows for 2016 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities. (Amounts to be deducted should be indicated with a minus sign.) |
2. | Prepare the cash flows from operating activities section of Diversifieds 2016 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) |
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