Cannon Company has the following information for the year ending December 31, 2015.
- Long-term debt of $18,000 was issued for cash.
- Cash paid for labor during 2015 amounted to $489,500.
- During the year, Cannon experienced a pension outflow of $14,000.
- Dividends of $34,000 were received.
- Cannon’s cash balance at the beginning of 2015 was $975,000; at the end of 2015 the cash balance was $839,500.
- The company made an investment of $310,000 in an affiliate company.
- A lease payment of $110,000 was made on November 1, 2015. There is no asset recorded in connection with the lease.
- During the year, Cannon collected $780,000 cash from customers.
- Cash paid for income taxes amounted to $56,000 for all of 2015.
- During 2015, Cannon discontinued its consumer electronics division. The business was sold resulting in a $12,000 net cash inflow.
- Prepare Cannon Company’s statement of cash flows for the year ending December 31, 2015 using the indirect method.
- Explain how the indirect statement of cash flows that you prepared would differ under IFRS rules. Assume this is a nonfinancial entity.
Part B (30 points)
The following Income Statement and Operating Cash Flow information pertain to Receivership Inc.’s operations for the year ended December 31, 2014. Prepare the net cash flow from operating activities section of the cash flow statement using the direct method.
Income statement for the year ended December 31, 2014
-Other SG&A (includes depreciation expenses)-198
Gain on sale of asset(5)
Income before tax177
Cash flow provided by operating activities (indirect method), for the year ended December 31, 2014
Gain on sale of asset(5)
Increases/decreases in A/R26
Advances from customers(3)
Other accrued SG&A5
Net cash provided by operating activities159
Part C (40 points)
The following information and financial statements excerpts pertain to Liquidity Inc.
a.All short term investments (securities available for sale) were purchased on 12/31/14 and sold during 2015.
b.The company entered a lease agreement on 12/31/15.
c.Fixed assets with a net book value of $15 were sold during the year.
d.The company repaid the current portion of long-term debt during the year.
e.Dividend was declared and partially paid.
Short term investments950
Prepaid general expenses1115
Fixed assets under capital lease, net050
Fixed assets, net165228
Liabilities and stockowners’ equity
Current portion of long term debt1012
Obligations under capital leases050
Long term debt183180
Cost of goods sold310
Loss on sale of fixed assets3
Gain on sale of securities available for sale–12
1.Prepare the statement of cash flows for the year 2015 using the direct method.
2.Reconcile net income and net cash flows from operating activities for the year 2015.