616 Chapter 13 Statement of Cash Flows
Operating income $ 530,300
Other expense:
Loss on sale of investments 25,000
Income before income tax $ 505,300
Income tax expense 175,000
Net income $ 330,300The following additional information was taken from the records:a. Equipment and land were acquired for cash.
b. There were no disposals of equipment during the year.
c. The investments were sold for $150,000 cash.
d. The common stock was issued for cash.
e. There was a $241,000 debit to Retained Earnings for cash dividends declared.Instructions
Prepare a statement of cash flows, using the direct method of presenting cash flows from oper-
ating activities.The comparative balance sheet of Winner’s Edge Sporting Goods, Inc., for December 31, 2007
and 2006, is as follows:Dec. 31, 2007 Dec. 31, 2006
Assets
Cash $ 464,100 $ 395,800
Accounts receivable (net) 163,200 145,700
Inventories 395,000 367,900
Investments 0 120,000
Land 160,000 0
Equipment 695,500 575,500
Accumulated depreciation—equipment (194,000) (168,000)
Total $1,683,800 $1,436,900Liabilities and Stockholders’ Equity
Accounts payable (merchandise creditors) $ 228,700 $ 210,500
Accrued expenses (operating expenses) 16,500 21,400
Dividends payable 14,000 10,000
Common stock, $10 par 75,000 60,000
Paid-in capital in excess of par—common stock 265,000 175,000
Retained earnings 1,084,600 960,000
Total $1,683,800 $1,436,900The income statement for the year ended December 31, 2007, is as follows:Sales $1,580,500
Cost of merchandise sold 957,300
Gross profit $ 623,200
Operating expenses:
Depreciation expense $ 26,000
Other operating expenses 329,400
Total operating expenses 355,400
Operating income $ 267,800
Other income:
Gain on sale of investments 12,000
Income before income tax $ 279,800
Income tax expense 99,200
Net income $ 180,600Problem 13-5A
Statement of cash flows—
direct method applied to
Problem 13-1A
Goal 3
Net cash flow from
operating activities, $163,300