601
Cash flows from operating activities:
Net income, per income statement $ 98,500
Add: Depreciation $23,500
Amortization of patents 7,000
Decrease in accounts receivable 7,000
Increase in accrued expenses 1,500 39,000
$137,500
Deduct: Increase in inventories $ 7,300
Increase in prepaid expenses 380
Decrease in accounts payable 3,200
Decrease in income taxes payable 500
Gain on sale of investments 11,000 22,380
Net cash flow from operating activities $115,120
Cash flows from investing activities:
Cash received from sale of:
Investments $60,000
Land 15,000 $ 75,000
Less: Cash paid for construction of building 115,000
Net cash flow used for investing activities (40,000)
Cash flows from financing activities:
Cash received from issuing mortgage
note payable $ 40,000
Less: Cash paid for dividends 70,670
Net cash flow used for financing activities (30,670)
Increase in cash $ 44,450
Cash at the beginning of the year 95,900
Cash at the end of the year $140,350Schedule of Noncash Investing and Financing Activities:
Issued common stock to retire bonds payable $100,000Dowling Company
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2007Solution
Sales $1,100,000
Cost of merchandise sold 710,000
Gross profit $ 390,000
Operating expenses:
Depreciation expense $ 23,500
Patent amortization 7,000
Other operating expenses 196,000
Total operating expenses 226,500
Income from operations $ 163,500
Other income:
Gain on sale of investments $ 11,000
Other expense:
Interest expense 26,000 (15,000)
Income before income tax $ 148,500
Income tax expense 50,000
Net income $ 98,500Dowling Company
Income Statement
For the Year Ended December 31, 2007