For the just completed year, Hanna Company had net income of$134,000. Balances in the company’s current asset and currentliability accounts at the beginning and end of the year were asfollows:
| December 31 |
| End of
Year | Beginning of Year |
| Current assets: | | | | |
| Cash and cash equivalents | $ | 61,000 | $ | 83,000 |
| Accounts receivable | $ | 166,000 | $ | 196,000 |
| Inventory | $ | 435,000 | $ | 367,000 |
| Prepaid expenses | $ | 11,500 | $ | 13,800 |
| Current liabilities: | | | | |
| Accounts payable | $ | 356,000 | $ | 392,000 |
| Accrued liabilities | $ | 8,000 | $ | 12,700 |
| Income taxes payable | $ | 38,000 | $ | 33,000 |
|
The Accumulated Depreciation account had total credits of$58,000 during the year. Hanna Company did not record any gains orlosses during the year.
The company’s income statement for the year appears below:
| | |
| Sales | $ | 1,080,000 |
| Cost of goods sold | | 600,000 |
| Gross margin | | 480,000 |
| Selling and administrative expenses | | 310,000 |
| Income before taxes | | 170,000 |
| Income taxes | | 36,000 |
| Net income | $ | 134,000 |
|
Required:
Using the direct method, convert the company's income statementto a cash basis. (Adjustment amounts that are to bededucted should be indicated with a minus sign.)
