The following financial statements were drawn from the records of Boston Materials, Inc.:

Income Statement For the Year Ended December 31, Year 2

Sales revenue ...................................................................$450,000
Cost of goods sold ............................................................(212,000)
Gross margin .....................................................................238,000
Operating expenses
Salary expense ..................................................................(96,000)
Depreciation expense ........................................................(18,500)
Utilities expense .................................................................(7,500)
Operating income ...............................................................116,000
Nonoperating items
Interest expense ..................................................................(3,500)
Gain on sale of equipment ...................................................1,500
Net income ............................................................................$114,000

Additional Information
1. Sold equipment costing $48,000 with accumulated depreciation of $26,000 for $23,500 cash.
2. Paid a $50,000 cash dividend to owners.

Required
Analyze the data and prepare a statement of cash flows using the direct method.

Transcribed Image Text:

Balance Sheets As of December 31 Year 1 Year 2 Assets $ 99,700 $ 25,400 60,000 Cash Accounts receivable 72,000 86,000 75,000 24,000 152,000 (75,000) 45,000 Inventory Notes receivable (long-term) Equipment Accumulated depreciation-equipment Land 104,000 (67,500) 60,000 $354,200 $306,400 Total assets Liabilities and equity Accounts payable Salaries payable Utilities payable Interest payable Notes payable (long-term) $ 35,300 18,200 1,400 $ 36,200 15,500 2,800 1,200 600 36,000 Common stock 120,000 178,700 $354,200 100,000 114,700 $306,400 Retained earnings Total liabilities and equity