Reference no: EM13281
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.