Question Details

Prepare a statement of cash flows for Lowz Company 



aEx. 1
The income statement of Frank Company is shown below:
FRANK COMPANY
Income Statement
For the Year Ended December 31, 2014

Sales		$8,400,000
Cost of goods sold		  5,400,000
Gross profit		3,000,000
Operating expenses
	Selling expenses	$500,000
	Administrative expense	700,000
	Depreciation expense	90,000
	Amortization expense	    30,000	  1,320,000
Net income		$1,680,000

Additional information:
1.	Accounts receivable increased $400,000 during the year.
2.	Inventory increased $250,000 during the year.
3.	Prepaid expenses increased $200,000 during the year.
4.	Accounts payable to merchandise suppliers increased $100,000 during the year.
5.	Accrued expenses payable increased $160,000 during the year.

Instructions
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2014, for Frank Company, using the direct method.

aEx. 2
The financial statements of Lowz Company appear below:
LOWZ COMPANY
Comparative Balance Sheet
December 31
	    2014		    2013	
Assets
Cash	$  36,000	$  23,000
Accounts receivable	25,000	34,000
Merchandise inventory	32,000	15,000
Property, plant, and equipment	50,000	78,000
Accumulated depreciation	   (21,000)	   (24,000)
	Total	$122,000	$126,000

Liabilities and Stockholders' Equity
Accounts payable	$  18,000	$  23,000
Income taxes payable	9,000	8,000
Bonds payable	8,000	33,000
Common stock	28,000	24,000
Retained earnings	    59,000	    38,000
	Total	$122,000	$126,000

LOWZ COMPANY
Income Statement
For the Year Ended December 31, 2014
Sales		$400,000
Cost of goods sold		  270,000
Gross profit		130,000
Operating expenses		    45,000
Income from operations		85,000
Interest expense		      5,000
Income before income taxes		80,000
Income tax expense		    24,000
Net income		$  56,000

The following additional data were provided:
1.	Dividends declared and paid were $35,000.
2.	During the year, equipment was sold for $17,000 cash. This equipment cost $28,000 originally and had a book value of $17,000 at the time of sale.
3.	All depreciation expense is in the operating expenses.
4.	All sales and purchases are on account.
5.	Accounts payable pertain to merchandise suppliers.
6.	All operating expenses except for depreciation were paid in cash.

Instructions
Prepare a statement of cash flows for Lowz Company using the direct method.





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