week 7 assignment Acc

week 7 assignment Acc

P23-6 (SCF—Indirect Method, and Net Cash Flow from Operating Activities, Direct Method)Comparative balance sheet accounts of Marcus Inc. are presented below.

MARCUS INC.

COMPARATIVEBALANCESHEETACCOUNTS

AS OFDECEMBER31, 2014AND2013

December 31

Debit Accounts 20142013

Cash $ 42,000 $ 33,750

Accounts Receivable 70,500 60,000

Inventory 30,000 24,000

Investments (available-for-sale) 22,250 38,500

Machinery 30,000 18,750

Buildings 67,500 56,250

Land 7,5007,500

$269,750$238,750

Credit Accounts

Allowance for Doubtful Accounts $ 2,250 $ 1,500

Accumulated Depreciation—Machinery 5,625 2,250

Accumulated Depreciation—Buildings 13,500 9,000

Accounts Payable 35,000 24,750

Accrued Payables 3,375 2,625

Long-Term Notes Payable 21,000 31,000

Common Stock, no-par 150,000 125,000

Retained Earnings 39,000 42,625

$269,750$238,750

Additional data (ignoring taxes):

1.Net income for the year was $42,500.

2.Cash dividends declared and paid during the year were $21,125.

3.A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized.

4.Investments that cost $25,000 were sold during the year for $28,750.

5.Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.

Marcus’s 2014 income statement follows (ignoring taxes).

Sales revenue $540,000

Less: Cost of goods sold 380,000

Gross margin 160,000

Less: Operating expenses (includes $8,625 depreciation and $5,400

bad debts) 120,450

Income from operations 39,550

Other: Gain on sale of investments $3,750

Loss on sale of machinery (800) 2,950

Net income $ 42,500

Instructions

(a)Compute net cash flow from operating activities using the direct method.

(b)Prepare a statement of cash flows using the indirect method.