Piura Manufacturing Comparative Balance Sheets For the Years Ended June 30, 20Xland 20X2 20X1 20X2 Assets Cash $ 72,000 $ 146,400 Accounts receivable 44,000 48,000 Inventory Plant and equipment Accumulated depreciation 64,000 44,000 104,000 112,000 (52,000) (48,000) 20,000 $252,000 Land 20,000 $ 322,400 Total assets Liabilities and equity Accounts payable Wages payable Bonds payable Preferred stock (no par) $ 32,000 $ 48,000 4,000 2,400 24,000 16,000 4,000 12,000 Common stock 30,000 36,000 Paid-in capital in excess of par Retained earnings Total liabilities and cquity 50,000 76,000 108,000 132,000 $252,000 $ 322,400 Piura Manufacturing Income Statement For the Year Ended June 30, 20X2 $ 320,000 (200,000) $ 120,000 (88,000) Sales Cost of goods sold Gross margin Operating expenses Net income $ 32,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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The comparative balance sheets and income statement of Piura Manufacturing follow

Additional transactions for 20X2 were as follows:
a. Cash dividends of $8,000 were paid.
b. Equipment was acquired by issuing common stock with a par value of $6,000. The fair
market value of the equipment is $32,000.
c. Equipment with a book value of $12,000 was sold for $6,000. The original cost of the
equipment was $24,000. The loss is included in operating expenses.
d. Two thousand shares of preferred stock were sold for $4 per share.
Required:
1. Prepare a schedule of operating cash flows using (a) the indirect method and (b) the direct
method.
2. Prepare a statement of cash flows using the indirect method.
3. Prepare a statement of cash flows using a worksheet similar to the one shown in
Example 14.8 (p. 804).

4. Form a group with two to four other students, and discuss the merits of the direct and
indirect methods. Which do you think investors might prefer? Should the FASB require
all companies to use the direct method?

Piura Manufacturing
Comparative Balance Sheets
For the Years Ended June 30, 20Xland 20X2
20X1
20X2
Assets
Cash
$ 72,000
$ 146,400
Accounts receivable
44,000
48,000
Inventory
Plant and equipment
Accumulated depreciation
64,000
44,000
104,000
112,000
(52,000)
(48,000)
20,000
$252,000
Land
20,000
$ 322,400
Total assets
Liabilities and equity
Accounts payable
Wages payable
Bonds payable
Preferred stock (no par)
$ 32,000
$ 48,000
4,000
2,400
24,000
16,000
4,000
12,000
Common stock
30,000
36,000
Paid-in capital in excess of par
Retained earnings
Total liabilities and cquity
50,000
76,000
108,000
132,000
$252,000
$ 322,400
Piura Manufacturing
Income Statement
For the Year Ended June 30, 20X2
$ 320,000
(200,000)
$ 120,000
(88,000)
Sales
Cost of goods sold
Gross margin
Operating expenses
Net income
$ 32,000
Transcribed Image Text:Piura Manufacturing Comparative Balance Sheets For the Years Ended June 30, 20Xland 20X2 20X1 20X2 Assets Cash $ 72,000 $ 146,400 Accounts receivable 44,000 48,000 Inventory Plant and equipment Accumulated depreciation 64,000 44,000 104,000 112,000 (52,000) (48,000) 20,000 $252,000 Land 20,000 $ 322,400 Total assets Liabilities and equity Accounts payable Wages payable Bonds payable Preferred stock (no par) $ 32,000 $ 48,000 4,000 2,400 24,000 16,000 4,000 12,000 Common stock 30,000 36,000 Paid-in capital in excess of par Retained earnings Total liabilities and cquity 50,000 76,000 108,000 132,000 $252,000 $ 322,400 Piura Manufacturing Income Statement For the Year Ended June 30, 20X2 $ 320,000 (200,000) $ 120,000 (88,000) Sales Cost of goods sold Gross margin Operating expenses Net income $ 32,000
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