Use the following financial statements and additional information to prepare the

Question

Use the following financial statements and additional information to prepare the entire statement of cash flows for the year ended December 31, 2012 using the direct method. Derby Company Balance Sheets December 2012 2011 Change Assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Equipment Accumulated depreciation-Equipment S 85,600 65,200 20.400 56,750 16,100 157,750 144,850 12,900 12,680 (6,600) 280,600 245,600 35,000 .(80.600) 97,60 17000 $522,280 $427.480 94.800 72,850 6,080 Total assets Liabilities: Accounts payable Income taxes payable Notes payable (long term) s 52,850 45,450 7,400 12,240 3,000 15,240 59.200 79.200 (20,000) Total liabilities S127,290$136,890 Equity Common stock Paid-in capital in excess of par Retained earnings 200,000 150,000 50,000 40,000 13,000 141,990 100.590 41,400 53,000 990 $290.590 Total equity Total liabilities and equity $522,280 $427.480 94,800

Explanation / Answer

Cash flow direct method Sales 488000 Adjustments to a cash basis Accounts receivable as per 2011 56750 Accounts receivable as per 2012 -72850 471900 Less Cost of goods sold 212540 Adjustments to a cash basis Inventory as per 2011 -144850 Inventory as per 2012 157750 Accounts payable as per 2011 45450 Accounts payable as per 2012 -52850 218040 Operating expense - depreciation 106260 Adjustments to a cash basis Prepaid expense 2011 -12680 Prepaid expense 2012 6080 99660 Income tax expense 41100 Income tax payable 2011 12240 Income tax payable 2012 -15240 38100 Total 355800 Cash flow from operating activities 116100 Cash flow statement Cash flow from operating activities 116100 Cash flow from Investing activities Sale of equipment 29700 Purchase of equipment -120000 Cash used in investing activities -90300 Cash flow from Financing activities Common stock 50000 Paid in capital in excess of par 13000 Cash dividend -42000 Interest expense -6400 Long term notes paid -20000 Cash flow from financing activities -5400 Net Cash and cash equivalent 20400 Add Beginning cash and cash equivalent 65200 Ending cash and cash equivalent 85600

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