Question

Cash flow information: Direct and indirectmethods

The comparative year-end balance sheets

20X5

20X4

Increase / Decrease)

Current assets

Cash

$55,400

$35,200

$20,200

Accounts receivable (net)

83,800

88,000

-4,200

Inventory

243,400

233,800

9,600

Prepaid expenses

25,400

24,200

1,200

Current liabilities

Accounts payable

$123,600

$140,600

($17,000)

Taxes payable

43,600

49,200

-5,600

Interest payable

9,000

6,400

2,600

Accrued liabilities

38,800

60,400

-21,600

Note payable

44,000

%u2014

44,000

SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31,20x5
Sales							$713,800
Less: Cost of goods sold							323,000
Gross profit							$390,800
Less: Selling &administrative expenses					$186,000
Depreciation expense					17,000
Interestexpense					27,000		230,000
Add: gain on sale of land							$160,800
							21,800
Income before taxes							$182,600
Income taxes							36,800
Net income							$145,800
							Other data: Long-term investments werepurchased for cash at a cost of $74,600. Cash proceeds from the sale ofland totaled $76,200. Store equipment of $44,000 waspurchased by signing a short-term note payable. Also, a $150,000telecommunications system was acquired by issuing 3,000 shares ofpreferred stock. A long-term note of $49,400 wasrepaid. Twenty thousand shares of commonstock were issued at $5.19 per share. The company paid cash dividendsamounting to $128,600.

Instructions:

1. Prepare the operating activitiessection of the company's statement of cash flows, assuming useof:

1. The direct method.

2. The indirect method.

Prepare the investing and financingactivities sections of the statement of cash flows.