AMY’S FASHION Given the following information (answer attached)

AMY’S FASHION Given the following information (answer attached)

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Given the following information and using the indirect method prepare the Cash Flows from Operating Activities section of the statement of cash flows.

End of Year Beginning of Year Change

Cash $345,000 $386,000

Accounts Receivable 554,300 567,800

Merchandise Inventory 693,000 672,400

Prepaid Expenses 27,000 24,000

Accounts Payable (merchandise creditors) 510,000 527,400

Wages Payable 39,500 36,000

The net income reported on the income statement for the current year was $465,000, which included a gain on sale of investments of $3,000. Depreciation recorded on store equipment for the year amounted to $99,800.

The T-Account Method of Analysis

By analyzing each transaction and each change in a ledger account for the year in terms of how it has affected cash we can assemble all the data required to prepare the Statement Of Cash Flows.

We will us the following comparative balance sheet and additional information to illustrate this method.


Dowling CompanyComparative Balance SheetDecember 31, 2002 and 2001

20022001Incr/DecrAssetsCash140,350 95,900 44,450 Accounts receivable (net)95,300 102,300 (7,000) Inventories165,200 157,900 7,300 Prepaid Expenses6,240 5,860 380 Investments (long-term)35,700 84,700 (49,000) Land75,000 90,000 (15,000) Buildings375,000 260,000 115,000 Accumulated Depreciation–buildings(71,300) (58,300) (13,000) Machinery and Equipment428,300 428,300 – Accumulated Depreciation–mach/equip(148,500) (138,000) (10,500) Patents58,000 65,000 (7,000) Total Assets1,159,290 1,093,660 65,630 Liabilities & Stockholders’ EquityAccounts payable (mdse creditors)43,500 46,700 (3,200) Accrued Expenses (operating expenses)14,000 12,500 1,500 Income taxes payable7,900 8,400 (500) Dividends payable14,000 10,000 4,000 Mortgage note payable, due 200240,000 – 40,000 Bonds payable150,000 250,000 (100,000) Common Stock450,000 375,000 75,000 PIC-excess of par-CS66,250 41,250 25,000 Retained Earnings373,640 349,810 23,830 Total liabilities & stockholders’ equity1,159,290 1,093,660 65,630


Additional Information:

a. Net Income, $98,500

b. Depreciation expense reported on the income statement: buildings, $13,000, machinery & equipment, $10,500.

c. Investments costing $49,000 were sold for $60,000.

d. Patent amortization reported on the income statement, $7,000.

e. Land costing $15,000 was sold for $15,000

f. A mortgage note was issued for $40,000.

g. A building costing $115,000 was constructed.

h. 2,500 shares of common stock were issued at 40 in exchange for the bonds payable.


i. Cash dividends declared were $74,670.

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