Hartman, Inc. has prepared the following comparative balance sheets for 2014 and

Question

Hartman, Inc. has prepared the following comparative balance sheets for 2014 and 2015:

                                     2015                  2014

Cash                         $ 350,400            $ 183,600

Accounts receivable   178,800                  140,400

Inventory                     180,000                 216,000

Prepaid expenses        21,600                  32,400

Plant assets                 1,530,000             1,260,000

Accumulated depreciation (540,000)          (450,000)

Patents                         183,600                 208,800

                                    $1,904,400             $1,591,200

Accounts payable       $ 183,600                $ 201,600

Accrued liabilities         72,000                    50,400

Martgage payable                                  540,000

Preferred stock             630,000                 

Additional paid-in

capital-preferred           144,000                  

Common stock              720,000                 720,000

Retained earnings        154,800                 79,200

                                     $1,904,400           $1,591,200

1. The Accumulated Depreciation account has been credited only for the depreciation expense for the period. 2. The Retained Earnings account has been charged for dividends of $177,600 and credited for the net income for the year.

The income statement for 2015 is as follows:

Sales revenue $2,376,000

Cost of sales 1,306,800

Gross profit 1,069,200

Operating expenses 816,000

Net income $ 253,200

From the information above, prepare a statement of cash flows (indirect method) for Hartman, Inc. for the year ended December 31, 2015. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

From the information above, prepare a schedule of cash provided by operating activities using the direct method.

Explanation / Answer

Statement of Cash Flow Under Indirect Method Particulars Amount Total Amount Opening cash and cash equivalents           183,600.00 Income             253,200.00 Depreciation                90,000.00 Amortisation of Patents                25,200.00 Increase in AR             (38,400.00) Decrease in inventory                36,000.00 Decrease in prepaid exp                10,800.00 Decrease in Ap             (18,000.00) Increase in Accrued Liab                21,600.00 Cash flow from operating activities           380,400.00 Cash flow from Investing activities Purchase of PPE           (270,000.00) Cash flow from Investing activities         (270,000.00) Cash flow from Financing activities Mortgage Paid           (540,000.00) Issue of preferred stock             630,000.00 Issue of additional paid in capital             144,000.00 Dividend Paid           (177,600.00) Cash flow from Financing activities             56,400.00 Closing cash and cash equivalents           350,400.00 Statement of Cash Flow under Direct Method Particulars Amount Total Amount Cash collected from Customers (2376000 - 38400) (Sales- Inc in AR)          2,337,600.00 Operating Expense Paid(816000 - 10800-115200)           (690,000.00) Payment to suppliers       (1,288,800.00) Raising Money through Accrued Liab                21,600.00 Cash flow from operating activities           380,400.00 Opening inv             216,000.00 Closing inventory             180,000.00 COGS          1,306,800.00 Purchases = COGS + Cl Inv - Op inv          1,270,800.00 Decrease in AP                18,000.00 Payment to Suppliers = 1270800 + 18000          1,288,800.00

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