P23-3 (SCFâDirect Method) MortonsonCompany has not yet prepared a formal statement of cash flows forthe 2014 fiscal year. Comparative balance sheets as of December 31,2013, and 2014, and a statement of income and retained earnings forthe year ended December 31, 2014, are presented below.
MORTONSON COMPANY
Statement of Income and Retained Earnings
For The Year Ended December 31, 2014
($000 Omitted)
Sales
$3,800
Expenses
Cost of goods sold
$1,200
Salaries and benefits
725
Heat, light, and power
75
Depreciation
80
Property taxes
19
Patent amortization
25
Miscellaneous expenses
10
Interest
30
2,164
Income before income taxes
1,636
Income taxes
818
Net income
818
Retained earnings - January 1, 2014
310
1,128
Stock dividend declared and issued
600
Retained earnings - December 31, 2014
$528
MORTONSON COMPANY
Comparative Balance Sheet
December 31
($000 Omitted)
Assets
2014
2013
Current assets
Cash
$333
$100
U.S. Treasury notes (Available-for-sale)
10
50
Accounts receivable
780
500
Inventory
720
560
Total current assets
1,843
1,210
Long-term assets
Land
150
70
Buildings and equipment
910
600
Accumulated depreciation
(200)
(120)
Patents (less amortization)
105
130
Total long-term assets
965
680
Total assets
$2,808
$1,890
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
$420
$330
Income taxes payable
40
30
Notes payable
320
320
Total current liabilities
780
680
Long-term notes payable - due 2016
200
200
Total liabilities
980
880
Stockholders' equity
Common stock outstanding
1,300
700
Retained earnings
528
310
Total stockholders' equity
1,828
1,010
Total liabilities and stockholders' equity
$2,808
$1,890
Instructions:
Prepare a statement of cash flows using the direct method.Changes in accounts receivable and in accounts payable relate tosales and cost of sales. Do not prepare a reconciliationschedule.
MORTONSON COMPANY
Statement of Cash Flows
For The Year Ended December 31, 2014
($000 omitted)
Cash flows from operating activities
Title
Amount
Title
Amount
Title
Amount
Title
Amount
Title
Amount
Title
Amount
Title
Amount
Title
Amount
Formula
Net cash provided by operating activities
Formula
Cash flows from investing activities
Title
Amount
Title
Amount
Title
Amount
Net cash used by investing activities
Formula
Increase in cash
Amount
Title
Amount
Title
Formula
(a) Sales
Amount
Title
Amount
Formula
Add: Title
Amount
Cash receipts (collections from customers)
Formula
(b) Cost of goods sold
Amount
Add: Title
Amount
Title
Formula
Deduct: Title
Amount
Title
Formula
Deduct: Title
Amount
Formula
Add: Title
Amount
Cash purchases (payments for merchandise)
Formula
(c) Income taxes
Amount
Title
Amount
Formula
Add: Title
Amount
Income taxes (cash)
Formula
P23-3 (SCFâDirect Method) MortonsonCompany has not yet prepared a formal statement of cash flows forthe 2014 fiscal year. Comparative balance sheets as of December 31,2013, and 2014, and a statement of income and retained earnings forthe year ended December 31, 2014, are presented below. | |||
MORTONSON COMPANY | |||
Statement of Income and Retained Earnings | |||
For The Year Ended December 31, 2014 | |||
($000 Omitted) | |||
Sales | $3,800 | ||
Expenses | |||
Cost of goods sold | $1,200 | ||
Salaries and benefits | 725 | ||
Heat, light, and power | 75 | ||
Depreciation | 80 | ||
Property taxes | 19 | ||
Patent amortization | 25 | ||
Miscellaneous expenses | 10 | ||
Interest | 30 | 2,164 | |
Income before income taxes | 1,636 | ||
Income taxes | 818 | ||
Net income | 818 | ||
Retained earnings - January 1, 2014 | 310 | ||
1,128 | |||
Stock dividend declared and issued | 600 | ||
Retained earnings - December 31, 2014 | $528 | ||
MORTONSON COMPANY | |||
Comparative Balance Sheet | |||
December 31 | |||
($000 Omitted) | |||
Assets | 2014 | 2013 | |
Current assets | |||
Cash | $333 | $100 | |
U.S. Treasury notes (Available-for-sale) | 10 | 50 | |
Accounts receivable | 780 | 500 | |
Inventory | 720 | 560 | |
Total current assets | 1,843 | 1,210 | |
Long-term assets | |||
Land | 150 | 70 | |
Buildings and equipment | 910 | 600 | |
Accumulated depreciation | (200) | (120) | |
Patents (less amortization) | 105 | 130 | |
Total long-term assets | 965 | 680 | |
Total assets | $2,808 | $1,890 | |
Liabilities and Stockholders' Equity | |||
Current liabilities | |||
Accounts payable | $420 | $330 | |
Income taxes payable | 40 | 30 | |
Notes payable | 320 | 320 | |
Total current liabilities | 780 | 680 | |
Long-term notes payable - due 2016 | 200 | 200 | |
Total liabilities | 980 | 880 | |
Stockholders' equity | |||
Common stock outstanding | 1,300 | 700 | |
Retained earnings | 528 | 310 | |
Total stockholders' equity | 1,828 | 1,010 | |
Total liabilities and stockholders' equity | $2,808 | $1,890 | |
Instructions: | |||
Prepare a statement of cash flows using the direct method.Changes in accounts receivable and in accounts payable relate tosales and cost of sales. Do not prepare a reconciliationschedule. | |||
MORTONSON COMPANY | |||
Statement of Cash Flows | |||
For The Year Ended December 31, 2014 | |||
($000 omitted) | |||
Cash flows from operating activities | |||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Title | Amount | Formula | |
Net cash provided by operating activities | Formula | ||
Cash flows from investing activities | |||
Title | Amount | ||
Title | Amount | ||
Title | Amount | ||
Net cash used by investing activities | Formula | ||
Increase in cash | Amount | ||
Title | Amount | ||
Title | Formula | ||
(a) Sales | Amount | ||
Title | Amount | ||
Formula | |||
Add: Title | Amount | ||
Cash receipts (collections from customers) | Formula | ||
(b) Cost of goods sold | Amount | ||
Add: Title | Amount | ||
Title | Formula | ||
Deduct: Title | Amount | ||
Title | Formula | ||
Deduct: Title | Amount | ||
Formula | |||
Add: Title | Amount | ||
Cash purchases (payments for merchandise) | Formula | ||
| |||
(c) Income taxes | Amount | ||
Title | Amount | ||
Formula | |||
Add: Title | Amount | ||
Income taxes (cash) | Formula | ||