Question
The following information was obtained from the accounting records and financial statements of Palmer Inc. Assets 2019 2020 Cash $ 280,000 315,000 35,000 Accounts receivable
The following information was obtained from the accounting records and financial statements of Palmer Inc.
Assets | 2019 | 2020 | |
Cash | $ 280,000 | 315,000 | 35,000 |
Accounts receivable | 720,000 | 755,000 | 35,000 |
Inventory | 855,000 | 800,000 | (55,000) |
Capital assets | 1,720,000 | 1,930,000 | 210,000 |
Accumulated depreciation | (580,000) | (550,000) | 30,000 |
Net capital assets | 1,140,000 | 1,380,000 | 240,000 |
Total | 2,995,000 | 3,250,000 |
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Liabilities and Stockholders equity |
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Accounts payable | 445,000 | 360,000 | (85,000) |
Interest payable | 60,000 | 75,000 | 15,000 |
Income taxes payable | 40,000 | 50,000 | 10,000 |
Bonds payable | 800,000 | 900,000 | 100,000 |
Common stocks | 1,200,000 | 1,350,000 | 150,000 |
Retained earnings | 450,000 | 515,000 | 65,000 |
Total | 2,995,000 | 3,250,000 |
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Income Statement 2020 |
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Sales | $ 3,200,000 |
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Cost of goods sold | (2,100,000) |
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Gross profit | 1,100,000 |
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Depreciation expenses | (105,000) |
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Operating expenses | (655,000) |
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Interest expenses | (35,000) |
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Income tax expenses | (55,000) |
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Loss on retirement of bonds payable | (10,000) |
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Loss on disposal of capital assets | (20,000) |
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Net income | 220,000 |
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Additional information:
- On May 5, 2020 a capital asset with a cost of $225,000 and net book value of $90,000 was sold for $70,000.
- On September 1, 2020, Palmer issued 5% bonds for face value of $ 200,000.
- On October 15, 2020, bonds with a face value of $ 100,000 were retired for $ 110,000.
- On December 20, 2020, Palmer declared and paid cash dividends.
Required:
- Prepare the cash flow statement, using the direct method, for Palmer for the year ended December 31, 2020.
- Prepare the cash flows from operating activities, using the indirect method, for Palmer for the year ended December 31, 2020.
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