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Question: Preparing the statement of cash flows—direct method The income statement and additional data of Value Corporation follow:

1. Collections from customers are \(13,000 more than sales.
2. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
3. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
4. Payments to employees are \)3,000 more than salaries expense.
5. Cash payment for the acquisition of plant assets is \(102,000.
6. Cash receipts from sale of land total \)29,000.
7. Cash receipts from issuance of common stock total \(38,000.
8. Payment of long-term notes payable is \)10,000.
9. Payment of dividends is \(9,000.
10. Cash balance at June 30, 2017, was \)21,000; at June 30, 2018, it was $43,000.

Prepare Value Corporation’s statement of cash flows for the year ended June 30, 2018. Use the direct method.

Step by step solution

01

Cash flow from operating activities

Cash flows from operating activities
Receipts:
Collection from customers	$246,000
Collection of dividend revenue	$7,000
Payments:
To suppliers	($116,000)
To employees	($51,000)
For income tax	($7,500)
For Interest	($2,500)
Net cash provided by operating activities		$76,000

02

Statement of cash flows- direct method

Value Corporation. Statement of cash flows Year ended 31st December, 2018
Cash flows from operating activities		$76,000
Cash flows from investing activities
Cash purchase of plant	($102,000)
Cash receipts from sale of land	$29,000
Net cash used for investing activities		($73,000)
Cash flows from financing activities
Cash receipts from issuance of common stock	$38,000
Cash payment of note payable	($10,000)
Cash payment of dividend	($9,000)
Net cash provided by financing activities		$19,000
Net Increase/(Decrease) in cash		$22,000
Cash balance, December 31, 2017		$21,000
Cash balance, December 31, 2018		$43,000

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