Hartman, Inc. has prepared the following comparative balance sheets for 2014 and
ID: 2501051 • Letter: H
Question
Hartman, Inc. has prepared the following comparative balance sheets for 2014 and 2015:
2015 2014
Cash $ 292,000 $ 153,000
Accounts receivable 149,000 117,000
Inventory 150,000 180,000
Prepaid expenses 18,000 27,000
Plant assets 1,275,000 1,050,000
Accumulated depreciation (450,000) (375,000)
Patent 153,000 174,000
$1,587,000 $1,326,000
Accounts payable $ 153,000 $ 168,000
Accrued liabilities 60,000 42,000
Mortgage payable — 450,000
Preferred stock 525,000 —
Additional paid-in capital—preferred 120,000 —
Common stock 600,000 600,000
Retained earnings 129,000 66,000
$1,587,000 $1,326,000
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 $148,000 and credited for the net income for the year.
The income statement for 2015 is as follows:
Sales revenue $1,980,000
Cost of sales 1,089,000
Gross profit 891,000
Operating expenses 680,000
Net income $ 211,000
Instructions
(a) From the information above, prepare a statement of cash flows (indirect method) for Hartman, Inc. for the year ended December 31, 2015.
(b) From the information above, prepare a schedule of cash provided by operating activities using the direct method.
Explanation / Answer
Solution :
Operating activities
Net income
211000
Add : depreciation
75000
Patent amortised
21000
Increase in accounts receivable
-32000
Decrease in inventory
30000
Decrease in prepaid expense
9000
Decrease in accounts payable
-15000
Incraese accrued liabilities
18000
Cash flow from operating activities
317000
Investing activies
Purchased plant assets
-225000
Cash flow from investing activities
-225000
Financing activities
Decrease in morgage payable
-450000
Dividnd paid
-148000
Preferred stock issued
645000
Cash flow from financing activities
47000
Net cash generated
139000
Add : opening cash balance
153000
Closing balance
292000
Cash flow from operating activities (direct method)
Cash received from customer
1948000
Cash paid to supplier
-1074000
Operating expense paid
-557000
(680000-75000-21000-9000-18000)
317000
Operating activities
Net income
211000
Add : depreciation
75000
Patent amortised
21000
Increase in accounts receivable
-32000
Decrease in inventory
30000
Decrease in prepaid expense
9000
Decrease in accounts payable
-15000
Incraese accrued liabilities
18000
Cash flow from operating activities
317000
Investing activies
Purchased plant assets
-225000
Cash flow from investing activities
-225000
Financing activities
Decrease in morgage payable
-450000
Dividnd paid
-148000
Preferred stock issued
645000
Cash flow from financing activities
47000
Net cash generated
139000
Add : opening cash balance
153000
Closing balance
292000
Cash flow from operating activities (direct method)
Cash received from customer
1948000
Cash paid to supplier
-1074000
Operating expense paid
-557000
(680000-75000-21000-9000-18000)
317000
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