Lemon Zester Company's Balance Sheet for December 31, 2019 and the Income Statement for 2020 are shown below. Balance Sheet as of December 31,2019 Cash $10,000 Accounts receivable 5,000 Inventory 12,000 Property and equipment, net 20,000 $47,000 Accounts payable $10,000 Note payable, long-term 5,000 Contributed earnings 20,000 Retained earnings 12,000 $47,000 Income Statement for 2020 Sales $13,000 Cost of goods sold 3,000 Wage expense 3,000 Interest expense 1,000 Other expenses 500 Net income $5,500 Additional Data for 2020: Sales were $13,000; $8,000 in cash was received from customers. Bought new land for cash, $10,000. Sold other land for its book value of $5,000. Paid $1,000 principal on the long-term note payable and $1,000 in interest. Issued new shares for $10,000 cash. $1,000 of dividends were declared and paid. Paid $5,500 on accounts payable. No inventory purchases were made; other expenses were incurred on account. All wages were paid in cash. Other expenses were on account. a. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the indirect method. b. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the direct method. c. Interpret the Statement of Cash Flows by explaining the main sources and uses of cash during the year.
Lemon Zester Company's
|
Balance Sheet as of December 31,2019 |
|
|
Cash |
$10,000 |
|
|
5,000 |
|
Inventory |
12,000 |
|
Property and equipment, net |
20,000 |
|
|
$47,000 |
|
Accounts payable |
$10,000 |
|
Note payable, long-term |
5,000 |
|
Contributed earnings |
20,000 |
|
|
12,000 |
|
|
$47,000 |
|
Income Statement for 2020 |
|
|
Sales |
$13,000 |
|
Cost of goods sold |
3,000 |
|
Wage expense |
3,000 |
|
Interest expense |
1,000 |
|
Other expenses |
500 |
|
Net income |
$5,500 |
Additional Data for 2020:
Sales were $13,000; $8,000 in cash was received from customers.
Bought new land for cash, $10,000.
Sold other land for its book value of $5,000.
Paid $1,000 principal on the long-term note payable and $1,000 in interest.
Issued new shares for $10,000 cash.
$1,000 of dividends were declared and paid.
Paid $5,500 on accounts payable.
No inventory purchases were made; other expenses were incurred on account.
All wages were paid in cash.
Other expenses were on account.
a. Prepare the Statement of
b. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the direct method.
c. Interpret the Statement of Cash Flows by explaining the main sources and uses of cash during the year.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
