Chapter 14, Problem 14.5APR

Statement of cash flows—direct method applied to PR 14-1A

The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is as follows:

	Dec. 31,2016	Dec. 31,2015
Assets
Cash………………	$ 625,760	$ 585,920
Accounts receivable (net)……………………	227,840	208,960
Inventories………………………	641.760	617,120
Investments……………	0	240,000
Land……………………	328,000	0
Equipment………………………	705,120	553,120
Accumulated depreciation—equipment………………………	(166,400)	(148,000)
Total assets………………………	$2,362,080	$2,057,120
Liabilities and Stockholders’ Equity
Accounts payable (merchandise creditors)………………………	$ 424,4B0	$ 404.960
Accrued expenses payable (operating expenses) ………………………	42,240	52,640
Dividends payable………………………	24,000	19,200
Common stock, $2 par………………………	150,000	100,000
Paid in capital: Excess of issue price over par—common stock…………………	417,500	280,000
Retained earnings………………………	1,303,860	1,200,320
Total liabilities and stockholders’ equity………………………	$2,362,080	$2,057,120
The income statement for the year ended December 31, 2016, is as follows:
Sales………………………		$ 5,372,559
Cost of merchandise sold………………………		3,306,190
Gross profit………………………		52,066,369
Operating expenses: Depreciation expense………………………	$ 18,400
Other operating expenses………………………	1,755,402
Total operating expenses………………………		1,773,802
Operating income………………………		$ 292,567
Other income: Gain on sale of investments………………………		40,000
Income before income tax………………………		$ 332,567
Income tax expense………………………		133,027
Net income………………………		$ 199,540

Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

• a. The investments were sold for $280,000 cash.
• b. Equipment and land were acquired for cash.
• c. There were no disposals of equipment during the year.
• d. The common stock was issued for cash.
• e. There was a $96,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.