The comparative year-end balance sheets of Sign Graphics, Inc., revealed

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Cash flow information: Direct and indirect methods
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company's current accounts:

 

20X5

20X4

Increase / Decrease)

Current assets

   

Cash

$55,400

$35,200

$20,200

 

Accounts receivable (net)

83,800

88,000

-4,200

 

Inventory

243,400

233,800

9,600

 

Prepaid expenses

25,400

24,200

1,200

 

    

 

Current liabilities

   

 

Accounts payable

$123,600

$140,600

($17,000)

 

Taxes payable

43,600

49,200

-5,600

 

Interest payable

9,000

6,400

2,600

 

Accrued liabilities

38,800

60,400

-21,600

 

Note payable

44,000

44,000

 

    

 

The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows.

SIGN GRAPHICS INC.

Income Statement

for the Year Ended December 31, 20x5

 

 

 

 

 

 

 

 

 

Sales

      

$713,800

 

Less: Cost of goods sold

    

323,000

 

Gross profit

     

$390,800

 

 

       

 

Less: Selling & administrative expenses

 

$186,000

  

 

Depreciation expense

 

   

17,000

  

 

     Interest expense  

 

   

27,000

 

230,000

 

 

       

 

Add: gain on sale of land

    

$160,800

 

 

      

21,800

 

Income before taxes

    

$182,600

 

Income taxes

     

36,800

 

Net income

     

$145,800

 

 

 

 

 

 

 

 

 

 

Other data:

  1. Long-term investments were purchased for cash at a cost of $74,600.
  2. Cash proceeds from the sale of land totaled $76,200.
  3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
  4. A long-term note of $49,400 was repaid.
  5. Twenty thousand shares of common stock were issued at $5.19 per share.
  6. The company paid cash dividends amounting to $128,600.

Instructions:

1. Prepare the operating activities section of the company's statement of cash flows, assuming use of:

The direct method.

The indirect method

2. Prepare the investing and financing activities sections of the statement of cash flows.

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