Chapter 22, Problem 22.1P

Prepare Statement of Cash Flows, Direct Method. Shark Company provided the following balance sheet and income statement for the current year. Prepare the operating activities section of the cash flow statement using the direct method. Assume that accrued expenses relate to selling general and administrative expenses

Shark Company Balance Sheet At December 31
Assets		Ending	Beginning
Current Assets
Cash	$ 1,000			$ 5,000
Accounts Receivable - net	5,500			3,000
Merchandise Inventory	4,000			1,800
Total Current Assets	$10,500			$ 9,800
Noncurrent Assets
Investments in Bonds	$30,000			$10,000
Property, Plant, and Equipment - net	$50,000			$60,000
Total Noncurrent Assets	$80,000			$70,000
Total Assets	$90,500			$79,800
Liabilities
Current Liabilities

Accounts Payable	$ 3,200	$ 4,400
Accrued Expenses	6,700	6,550
Income Taxes Payable	1,500	2,450
Total Current Liabilities	$11,400	$13,400
Noncurrent Liabilities
Notes Payable	$35,000	$28,000
Total Noncurrent Liabilities	$35,000	$28,000
Total Liabilities	$46,400	$41,400
Shareholders’ Equity
Common Stock, $1 par value	$10,000	$ 9,000
Additional Paid-in Capital in Excess of Par - Common	15,334	12,000

Retained Earnings	18,766	17,400
Total Shareholders’ Equity	$44,100	$38,400
Total Liabilities and Shareholders’ Equity	$90,500	$79,800

Shark Company Income Statement For the Year Ended December 31
Sales	$56,000
Cost of Goods Sold	33,600
Gross Profit	$22,400
Selling. General, and Administrative Expenses	$11,600
Depreciation Expense	6,000
Total Operating Expenses	$ 17,600
Operating Income	$ 4,800
Interest Expense	$(2,100)
Income before Tax	$ 2,700
Income Tax Expense	(1,334)
Net Income	$ 1,366