The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended
Question:
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2016, appears below:
Service revenue | $ | 1,020,000 |
Operating expenses | 760,000 | |
Income before income taxes | 260,000 | |
Income tax expense | 52,000 | |
Net income | $ | 208,000 |
The following balance sheet information also is available: |
12/31/16 | 12/31/15 | |||
Cash | $ | 381,000 | $ | 76,000 |
Accounts receivable | 132,000 | 106,000 | ||
Accounts payable (operating expenses) | 82,000 | 66,000 | ||
Income taxes payable | 16,000 | 27,000 | ||
In addition, the following transactions took place during the year: | |
1. | Common stock was issued for $112,000 in cash. |
2. | Long-term investments were sold for $56,000 in cash. The original cost of the investments also was $56,000. |
3. | $86,000 in cash dividends was paid to shareholders. |
4. | The company has no outstanding debt, other than those payables listed above. |
5. | Operating expenses include $36,000 in depreciation expense. |
Required: | |
1. | Prepare a statement of cash flows for 2016 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities. (Amounts to be deducted should be indicated with a minus sign.) |
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty