E23-13.

(SCFDirect Method)

(LO 2, 3) Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

BRECKER INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
	12/31/17	12/31/16
Cash	$6,000	$7,000
Accounts receivable	62,000	51,000
Short-term debt investments (available-for-sale)	35,000	18,000
Inventory	40,000	60,000
Prepaid rent	5,000	4,000
Equipment	154,000	130,000
Accumulated depreciationequipment	(35,000)	(25,000)
Copyrights	46,000	50,000
Total assets	$313,000	$295,000
Accounts payable	$46,000	$40,000
Income taxes payable	4,000	6,000
Salaries and wages payable	8,000	4,000
Short-term loans payable	8,000	10,000
Long-term loans payable	60,000	69,000
Common stock, $10 par	100,000	100,000
Contributed capital, common stock	30,000	30,000
Retained earnings	57,000	36,000
Total liabilities and stockholders' equity	$313,000	$295,000

BRECKER INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue		$338,150
Cost of goods sold		175,000
Gross profit		163,150
Operating expenses		120,000
Operating income		43,150
Interest expense	$11,400
Gain on sale of equipment	2,000	9,400
Income before tax		33,750
Income tax expense		6,750
Net income		$27,000

Additional information:

• 1.Dividends in the amount of $6,000 were declared and paid during 2017.
• 2.Depreciation expense and amortization expense are included in operating expenses.
• 3.No unrealized gains or losses have occurred on the investments during the year.
• 4.Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2017.

Instructions

Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

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