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SCF-Direct and Indirect Methods
Comparative balance sheet accounts of Sharpe Company are presented below.
SHARPE COMPANYCOMPARATIVE BALANCE SHEET ACCOUNTS As OF DECEMBER 31
Debit Balances
2014
2013
Cash
$ 70,000
$ 51,000
Accounts Receivable
155,000
130,000
Inventory
75,000
61,000
Investments (available-for-sale)
55,000
85,000
Equipment
70,000
48,000
Buildings
145,000
Land
40,000
25,000
Totals
$610,000
$545,000
Credit Balances
Allowance for Doubtful Accounts
$ 10,000
$ 8,000
Accumulated Depreciation-Equipment
21,000
14,000
Accumulated Depreciation-Buildings
37,000
28,000
Accounts Payable
66,000
60,000
Income Taxes Payable
12,000
10,000
Long-Term Notes Payable
62,000
Common Stock
310,000
260,000
Retained Earnings
92,000
95,000
Additional data:
1. Equipment that cost $10,000 and was 60% depreciated was sold in 2014.
2. Cash dividends were declared and paid during the year.
3. Common stock was issued in exchange for land.
4. Investments that cost $35,000 were sold during the year.
5. There were no write-offs of uncollectible accounts during the year.
Sales revenue
$950,000
Less: Cost of goods sold
600,000
Gross profit
350,000
Less: Operating expenses (includes depreciation expense and bad debt expense)
250,000
Income from operations
100,000
Other revenues and expenses
Gain on sale of investments
$15,000
Loss on sale of equipment
(3,000)
Income before taxes
112,000
Income taxes
45,000
Net income
$ 67,000
Instructions
(a) Compute net cash provided by operating activities under the direct method.
(b) Prepare a statement of cash flows using the indirect method.
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