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PREPARE DIRECT METHOD
Condensed financial data of Mennan Company appear below:
MENNAN COMPANY
Comparative Balance Sheet
December 31
2010 2009
Assets
Cash $ 61,000 $ 35,000
Accounts receivable 75,000 53,000
Inventories 118,000 132,000
Prepaid expenses 21,000 25,000
Investments 100,000 75,000
Plant assets 325,000 250,000
Accumulated depreciation (65,000) (60,000)
Total $635,000 $510,000
Liabilities and Stockholders' Equity
Accounts payable $ 98,000 $ 75,000
Accrued expenses payable 24,000 24,000
Bonds payable 120,000 160,000
Common stock 275,000 170,000
Retained earnings 118,000 81,000
Total $635,000 $510,000
MENNAN COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales $470,000
Less:
Cost of goods sold $310,000
Operating expenses (excluding depreciation) 50,000
Depreciation expense 17,000
Income taxes 20,000
Interest expense 18,000
Loss on sale of plant assets 3,000 418,000
Net income $ 52,000
Additional information:
1. New plant assets costing $100,000 were purchased for cash in 2010.
2. Old plant assets costing $25,000 were sold for $10,000 cash when book value was $13,000.
3. Bonds with a face value of $40,000 were converted into $40,000 of common stock.
Instructions
Prepare a statement of cash flows for the year using the DIRECT method.
Answer & Explanation
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