(SCFA????1Direct Method) Mortonson Company has not yet prepared a formal statement of cash flows for the 2014 fiscal year. Comparative balance sheets as of December 31, 2013, and 2014, and a statement of income and retained earnings for the year ended December 31, 2014, are presented below. MORTONSON COMPANY Statement of Income and Retained Earnings For The Year Ended December 31, 2014 ($000 Omitted) Sales $3,800 Expenses Cost of goods sold $1,200 Salaries and benefits 725 Heat, light, and power 75 Depreciation 80 Property taxes 19 Patent amortization 25 Miscellaneous expenses 10 Interest 30 2,164 Income before income taxes 1,636 Income taxes 818 Net income 818 Retained earnings – January 1, 2014 310 1,128 Stock dividend declared and issued 600 Retained earnings – December 31, 2014 $528 MORTONSON COMPANY Comparative Balance Sheet December 31 ($000 Omitted) Assets 2014 2013 Current assets Cash $333 $100 U.S. Treasury notes (Available-for-sale) 10 50 Accounts receivable 780 500 Inventory 720 560 Total current assets 1,843 1,210 Long-term assets Land 150 70 Buildings and equipment 910 600 Accumulated depreciation (200) (120) Patents (less amortization) 105 130 Total long-term assets 965 680 Total assets $2,808 $1,890 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $420 $330 Income taxes payable 40 30 Notes payable 320 320 Total current liabilities 780 680 Long-term notes payable – due 2016 200 200 Total liabilities 980 880 Stockholders’ equity Common stock outstanding 1,300 700 Retained earnings 528 310 Total stockholders’ equity 1,828 1,010 Total liabilities and stockholders’ equity $2,808 $1,890 Instructions: Prepare a statement of cash flows using the direct method. Changes in accounts receivable and in accounts payable relate to sales and cost of sales. Do not prepare a reconciliation schedule. MORTONSON COMPANY Statement of Cash Flows For The Year Ended December 31, 2014 ($000 omitted) Cash flows from operating activities Title Amount Title Amount Title Amount Title Amount Title Amount Title Amount Title Amount Title Amount Formula Net cash provided by operating activities Formula Cash flows from investing activities Title Amount Title Amount Title Amount Net cash used by investing activities Formula Increase in cash Amount Title Amount Title Formula (a) Sales Amount Title Amount Formula Add: Title Amount Cash receipts (collections from customers) Formula (b) Cost of goods sold Amount Add: Title Amount Title Formula Deduct: Title Amount Title Formula Deduct: Title Amount Formula Add: Title Amount Cash purchases (payments for merchandise) Formula (c) Income taxes Amount Title Amount Formula Add: Title Amount Income taxes (cash) Formula
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