The following balance sheets and income statement were taken from the records of Rosie-Lee Company:

Rosie-Lee Company
Income Statement
For the Year Ended June 30, 2010
Sales ............$ 920,000
Less: Cost of goods sold ......(620,000)
Gross margin ........$ 300,000
Less: Operating expenses .....(177,600)
Net income ..........$ 122,400
Additional transactions were as follows:
a. Sold equipment costing $21,600 with accumulated depreciation of $16,200 for $3,600.
b. Issued bonds for $90,000 on December 31.
c. Paid cash dividends of $36,000.
d. Retired mortgage of $108,000 on December 31.

Required:
1. Prepare a schedule of operating cash flows by using:
a. The indirect method
b. The direct method
2. Prepare a statement of cash flows by using the indirectmethod.

Transcribed Image Text:

Rosie-Lee Company Comparative Balance Sheets December 31, 2009 and 2010 2010 Assets Cash Accounts receivable Investments Plant and equipment Accumulated depreciation $270,000 126,000 180,000 (54,000) 36,000 $558,000 $333,000 144,000 54,000 189,000 (57,600) 54,000 $716,400 Total assets Liabilities and equity Accounts payable Mortgage payable Bonds payable Preferred stock Common stock Retained earnings $ 72,000 90,000 108,000 90,000 36,000 180,000 162,000 $558,000 288,000 248,400 $716,400 Total liabilities and equity