Posted: August 30th, 2016

Prepare a statement of cash flows using the direct method

Income and Retained Earnings
For The Year Ended December 31, 2012
($000 Omitted)
Sales $3,800
Expenses
Cost of goods sold $1,200
Salaries and benefits 725
Heat, light, and power 75
Depreciation 80
Property taxes 19
Patent amortization 25
Miscellaneous expenses 10
Interest 30 2,164
Income before income taxes 1,636
Income taxes 818
Net income 818
Retained earnings – January 1, 2012 310
1,128
Stock dividend declared and issued 600
Retained earnings – December 31, 2012 $528
MORTONSON COMPANY
Comparative Balance Sheet
December 31
($000 Omitted)
Assets 2012 2011
Current assets
Cash $333 $100
U.S. Treasury notes (Available-for-sale) 10 50
Accounts receivable 780 500
Inventory 720 560
Total current assets 1,843 1,210
Long-term assets
Land 150 70
Buildings and equipment 910 600
Accumulated depreciation (200) (120)
Patents (less amortization) 105 130
Total long-term assets 965 680
Total assets $2,808 $1,890
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $420 $330
Income taxes payable 40 30
Notes payable 320 320
Total current liabilities 780 680
Long-term notes payable – due 2014 200 200
Total liabilities 980 880
Stockholders’ equity
Common stock outstanding 1,300 700
Retained earnings 528 310
Total stockholders’ equity 1,828 1,010
Total liabilities and stockholders’ equity $2,808 $1,890
Instructions:
Prepare a statement of cash flows using the direct method. Changes in accounts receivable and in accounts payable relate to sales and cost of sales. Do not prepare a reconciliation schedule.