Statement of Cash Flows Under The Direct Method

1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. If an amount box does not require an entry, enter 0.

2. Prepare a statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2. Use a minus to indicate any decreases in cash or cash outflows.

Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below:

McGinnis Company Income Statement For Year Ended December 31, 20-2
Net sales				$1,750,000
Cost of goods sold				890,000
Gross profit				$860,000
Operating expenses				590,600
Operating income				$269,400
Other revenues and expenses:
Interest revenue		$ 2,700
Interest expense		(750)
Gain on sale of office equipment		15,000		16,950
Income before taxes				$286,350
Income tax expense				95,000
Net income				$191,350

McGinnis Company Statement of Retained Earnings For Year Ended December 31, 20-2
Retained earnings, January 1, 20-2				$320,000
Net income		$191,350
Less dividends		40,000
Net increase in retained earnings				151,350
Retained earnings, December 31, 20-2				$471,350

Additional information:

1. Office equipment was sold in 20-2 for $35,000. Additional information on the office equipment sold is provided below.

Cost		$100,000
Accumulated depreciation		(80,000)
Book value		$20,000
Market value		35,000
Gain on sale		$15,000

2. Depreciation expense for the year was $70,000.

3. The following purchases were made for cash:

Store equipment		$140,000
Delivery equipment		100,000
Office equipment		32,000
		$272,000

4. Declared and paid cash dividends of $40,000.

5. Issued 10,000 shares of $10 par common stock for $22 per share.

6. Acquired additional office equipment by issuing a note payable for $8,000.

McGinnis Company Comparative Balance Sheet December 31, 20-2 and 20-1
		20-2		20-1	INCREASE (DECREASE)
Assets
Current assets:
Cash	$103,420		$50,520		$52,900
Government notes	5,400		16,000		(10,600)
Accrued interest receivable	830		580		250
Accounts receivable (net)	300,600		309,200		(8,600)
Merchandise inventory	580,300		495,800		84,500
Supplies and prepayments	65,000		32,000		33,000
Total current assets		$1,055,550		$904,100	151,450
Property, plant, and equipment:
Store equipment	$560,000		$420,000		140,000
Less accumulated depreciation-store equipment	120,000	440,000	90,000	310,000	30,000
Delivery equipment	$430,000		$330,000		100,000
Less accumulated depreciation-delivery equipment	150,000	280,000	120,000	290,000	30,000
Office equipment	$320,000		$380,000		(60,000)
Less accumulated depreciation-office equipment	30,500	289,500	100,500	279,500	(70,000)
Total property, plant, and equipment		$1,009,500		$819,500	190,000
Total assets		$2,065,050		$1,723,600	341,450
Liabilities
Current liabilities:
Notes payable	$117,000		$109,000		8,000
Accounts payable	135,000		185,000		(50,000)
Income tax payable	25,000		15,000		10,000
Accrued and withheld payroll taxes	15,800		13,400		2,400
Accrued interest payable	900		1,200		(300)
Total current liabilities		$293,700		$323,600	(29,900)
Stockholders' Equity
Common stock ($10 par, 400,000 shares authorized;
Issued: 80,000 in 20-2 and 70,000 in 20-1)	$800,000		$700,000		100,000
Paid-in capital in excess of par-common stock	500,000		380,000		120,000
Retained earnings	471,350		320,000		151,350
Total stockholders' equity		1,771,350		1,400,000	371,350
Total liabilities and stockholders' equity		$2,065,050		$1,723,600	341,450

Schedule of Calculations

1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. If an amount box does not require an entry, enter 0.

McGinnis Company
Schedule for the Calculation of Cash Generated from Operating Activities
For Year Ended December 31, 20-2
	Income Statement	Additions	Deductions	Cash Flows
Net sales	$1,750,000	$		$
Cost of goods sold	890,000
Gross profit	$ 860,000			$
Operating expenses	590,600		$
Operating income	$269,400			$
Interest revenue	2,700
Interest expense	750
Gain of sale of office equipment	15,000
Income tax expense	95,000
Net income	$191,350			$

Statement of Cash Flows

2. Prepare a statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2. Use a minus to indicate any decreases in cash or cash outflows.

McGinnis Company
Statement of Cash Flows
For the Year Ended December 31, 20-2
Cash flows from operating activities:
	$
		$
	$
Total cash disbursed for operating activities
Net cash provided by operating activities		$
Cash flows from investing activities:
	$
Net cash used by investing activities
Cash flows from financing activities:
	$
Net cash provided by financing activities
		$
Cash and cash equivalents, January 1, 20-2
Cash and cash equivalents, December 31, 20-2		$
Schedule of Noncash Investing and Financing Activities:
		$