Statement of Cash Flows: Direct Method The following balance sheets are taken from the records of Golding: 20X1 20X2 Assets Cash $130000 $150000 Accounts receivable 25,000 20000 Plant and equipment 50,000 60000 Accumulated depreciation (20000) (25000) Land 10,000 10000 Total assets $195000 $215000 Liabilities and equity: Accounts payable $ 10000 $5000 Bonds payable 8000 18000 Common stock 120000 120000 Retained earnings 57000 72000 Total liabilities and equity $ 195000 $215000 Additional information is as follows: Equipment costing $10,000 was purchased at year-end. No equipment was sold. Net income for the year was calculated as follows: Revenues $ 500,000 Cost of goods sold (375,000) Depreciation expense (5,000) Other expenses (95,000) Net income $ 25,000 Required: Prepare a statement of operating cash flows using the direct method.

Cash flows from operating activities: Income Statement Adjustments Cash Flows Revenues $ 500,000 $ 5,000[latex]a[/latex] $ 505,000 Cost of goods sold (375,000) (5,000)[latex]b[/latex] (380,000) Depreciation expense (5,000) 5000[latex]c[/latex] Other expenses (95,000) (95,000) Net cash from operating activities $ 30,000 [latex]a[/latex] Decrease in accounts receivable. [latex]b[/latex]Decrease in accounts payable. [latex]c[/latex]Add back depreciation (noncash expense).

Question 14.RP.2: Statement of Cash Flows: Direct Method The following balance...

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Statement of Cash Flows: Direct Method

The following balance sheets are taken from the records of Golding:

	20X1	20X2
Assets
Cash	$130000	$150000
Accounts receivable	25,000	20000
Plant and equipment	50,000	60000
Accumulated depreciation	(20000)	(25000)
Land	10,000	10000
Total assets	$195000	$215000
Liabilities and equity:
Accounts payable	$ 10000	$5000
Bonds payable	8000	18000
Common stock	120000	120000
Retained earnings	57000	72000
Total liabilities and equity	$ 195000	$215000

Additional information is as follows: Equipment costing $10,000 was purchased at year-end. No equipment was sold. Net income for the year was calculated as follows:

Revenues $ 500,000
Cost of goods sold (375,000)
Depreciation expense (5,000)
Other expenses (95,000)
Net income $ 25,000

Required:
Prepare a statement of operating cash flows using the direct method.

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