Question

Direct: Preparing statement of cash flows and supporting note LO P1, P3, P5
Cash and cash equivalents balance, December 31, 2016$40,000
Cash and cash equivalents balance, December 31, 2017 148,000
Cash received as interest 3,500
Cash paid for salaries 76,500
Bonds payable retired by issuing common stock (no gain or loss on retirement) 185,500
Cash paid to retire long-term notes payable 100,000
Cash received from sale of equipment 60,250
Cash received in exchange for six-month note payable 35,000
Land purchased by issuing long-term note payable 105,250
Cash paid for store equipment 24,750
Cash dividends paid 10,000
Cash paid for other expenses 20,000
Cash received from customers 495,000
Cash paid for inventory 254,500
Use the above information about the cash flows of Ferron Company to prepare a complete statement of cash flows (direct method) for the year ended December 31, 2017. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

Statement of cash flows (direct method) for the year ended December 31, 2017

Cash flow from Operating Activities

Cash received from customers                                               495,000

Cash paid to Suppliers and Employees(20,000 + 76,500)   -96,500

Net Cash from Operating Activities                                        398,500

Cash flow from Investing Activities

Interest Received                                                                         3,500

Proceeds from Sale of Equipment                                            60,250

Purchase of Store Equipment                                                  -24,750

Net Cash from Investing Activities                                          -39,000

Cash flow from Financing Activities

Repurchase of Notes Payable                                               -100,000

Dividends Paid                                                                          -10,000

Net Cash from Financing Activities                                        -110,000

Movement During the Year                                                     108,000

Cash and Cash Equivalents at Beginning of the Year            40,000

Cash and Cash Equivalents at End of the Year                      148,000

Explanation:

Cash flow Statements include only those items that involve movement of Cash. Therefore, ignore non-cash items.

Note also that, the direct method is required for this question. Therefore, stick to the required method and ignore an cash related to Working Capital items (as this is dealt with in indirect method)