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The SCQ Corporation manufactures specialty medical tools ranging from $10,000 to$15,000 per unit. The tools are used in hospitals, clinics, and the home hospitality market.

The SCQ Corporation manufactures specialty medical tools ranging from $10,000 to$15,000 per unit. The tools are used in hospitals, clinics, and the home hospitality market. SCQ Corporation has contracted with YOUCPA to assist in creating its cash flow statement. In the past, its income statement and balance sheet have been prepared by the internal accountant.

It would like you to assist in preparing the cash flows using both the direct and indirect method. Sales and balance sheet information for the years 20092010 are below:

Balance Sheet

SCQ Corporation

For period ending 12/31/2010

Assets

2010

2009

Liabilities

2010

2009

Cash

150

100

Account receivable

600

400

Accounts payable

400

300

Inventory

750

500

Accrued taxes payable

200

100

Current assets

1,500

1,000

Current liabilities

600

400

Land

50

50

Equipment

1,300

1,200

Note payable

330

300

Less: Acc. depreciation

700

600

Deferred taxes

35

20

Net fixed assets

600

600

Equity:

Total fixed assets

650

650

Common stock

640

500

Paid-in capital

80

80

Retain earnings

465

350

Total equity

1,185

930

Total assets

2,150

1,650

Total equity and liabilities

2,150

1,650

Income Statement

SCQ Corporation

For period ending 12/31/ 2010

Items

2010

2009

Revenue

1,000

900

Cost of goods sold

400

350

Gross profit

600

550

Wages expense

110

100

Interest expense

50

40

Depreciation expense

100

90

Insurance expense

50

50

Other misc. expenses

90

80

Total expenses

400

360

Operating income

200

190

Taxes:

Deferred taxes

15

20

Taxes expense

70

67

Net income after taxes

115

103

Additions to retains earnings

115

103

The information below can be used to complete the direct method of cash flow:

Cash flows from operating activities

2010

Cash receipts

Received from sales of goods

930

Paid for inventory

400

Paid for employees

110

Paid for interest

50

Paid for taxes

70

Paid for other expenses

320

Cash paid for equipment

100

Cash received for common stock

140

Cash received from note payable

30

Assignment Guidelines:

Indirect method cash flow/cash flow statement:

What is the operational cash flow?

What is the investing cash flow?

What is the financing cash flow?

Direct method cash flow:

What is the operational cash flow?

What is the investing cash flow?

What is the financing cash flow?

What are the differences in the cash flow concepts and procedures between the direct and indirect methods?

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