The following events occurred at Clark Corp. during its first year of business ending on December 31:
• Clark sold $78,000 of common stock for cash.
• Clark paid $7,500 at the beginning of the year to rent office space for the year.
• Computer equipment was purchased for $25,000 cash at the beginning of the year. The equipment is expected to be useful for 5 years with no salvage value. Clark uses straight-line depreciation.
• Service revenue in the first year amounted to $120,000, $25,000 of which was on account.
• Accounts receivable from customers at the end of the year totaled $5,000.
• Salaries expense amounted to $62,500 for the year. Salaries payable at the end of the year was $3,000.
• Clark declared and paid a $5,000 cash dividend to stockholders at the end of the first year.
a. Prepare Clark's income statement for the year.
b. Prepare Clark's complete statement of cash flows for the year using the direct method.
c. Explain why Clark generated more or less operating cash flows than net income.

  • CreatedJuly 16, 2015
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