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Prepare a statement of cash flow using the direct method
Course:- Financial Accounting
Reference No.:- EM13281




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Roland & Sons' Music Ltd.'s comparative balance sheets at December 31, 20x7 and 20x8, and its income statement for the year ended December 31, 20x8 are as follows: 

Roland & Sons' Music Ltd.
Statement of Financial Position
As at December 31

Current assets            

20x8

 20x7

Cash 

$116,000  

$90,500 

Accounts receivable 

65,000  

56,000 

Merchandise inventory 

226,000  

210,000 

Prepaid expenses 

57,500  

49,000

 

464,500  

405,500 

Long-term investments 

127,000  

177,000 

Capital Assets 

1,250,000  

1,035,000 

Accumulated amortization 

(212,000) 

(262,000)

 

1,165,000  

950,000

Total Assets

$1,629,500  

$1,355,500

 

Current liabilities

 

 

Accounts payable 

$48,000  

$53,000

Salaries & wages payable 

72,000  

65,000 

Interest payable 

     4,000 

     -

Income taxes payable 

27,500  

25,000

 

151,500  

143,000 

 Bonds payable 

225,000  

     - 

Shareholders' Equity

 

 

Common shares 

750,000  

750,000 

Retained earnings 

503,000  

462,500 

 

1,253,000

1,212,500

Total Liabilities & Shareholders' Equity

 

$1,629,500  

$1,355,500

 

 Additional Information for 20x8 -

1. Sold $50,000 of long-term investments on January 1, 20x8 for $65,000.

2. Sold equipment for $80,000 that had originally cost $210,000.

3. Declared and paid a $100,000 cash dividend.

Required -

a) Prepare a Statement of Cash Flow using the Direct Method.

b) Prepare the Operations section of the Statement of Cash Flow using the Indirect Method. 




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