Refer to the information presented for Diatessaron Inc. in P17-11A. Additional information: 1. All purchases of inventory
Question:
Additional information:
1. All purchases of inventory are on credit.
2. Accounts Payable is used only to record purchases of inventory.
Instructions
Prepare a cash flow statement for the year using the direct method.
TAKING IT FURTHER
Why is it necessary to know that Accounts Payable when using the direct method, but not the indirect method?
DIATESSARON INC. Balance Sheet December 31 Assets Cash Accounts receivable Inventory Long-term investment Property, plant, and equipment Less: Accumulated depreciation 2017 67,000 101,000 205,000 101,500 535,000 2016 $ 98,000 75,000 155,500 460,000 (162,500)(140,000) $648,500 $847,000 Liabilities and Shareholders Accounts payable Dividends payable Income tax payabl Long-term notes payable Common shares Retained earnings $57,500 6,000 14,000 25,000 630,000 114,500 $847,000 $ 47,000 15,000 525,000 61,500 $648,500 DIATESSARON INC. Income Statement Year Ended December 31,2017 Sales Cost of goods sold Gross profit Operating expenses Loss on sale of equipment Profit from operations Interest expense Interest revenue Profit before income tax Income tax expense Profit $663,000 432,000 231,000 $147,500 3,000 150,500 80,500 3,000 (4,500) (1,500) 82,000 14,000 68,000
Step by Step Answer:
DIATESSARON INC Cash Flow Statement Direct Method Year Ended December 31 2017 Operating activities Cash receipts From customers 637000 1 From interest ...View the full answer
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
Related Video
In order to determine the amount of cash created by operating operations, the indirect technique for preparing the statement of cash flows entails adjusting net income with changes in balance sheet.
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