Peoria Corp. just completed another successful year, as indicated by the following income statement:
For the Year Ended
December 31, 2014
Sales revenue $1,250,000
Cost of goods sold 700,000
Gross profit $ 550,000
Operating expenses 150,000
Income before interest and taxes $ 400,000
Interest expense 25,000
Income before taxes $ 375,000
Income tax expense 150,000
Net income $ 225,000
Presented here are comparative balance sheets:
2014 2013
Cash $ 52,000 $ 90,000
Accounts receivable 180,000 130,000
Inventory 230,000 200,000
Prepayments 15,000 25,000
Total current assets $ 477,000 $ 445,000
Land $ 750,000 $ 600,000
Plant and equipment 700,000 500,000
Accumulated depreciation (250,000) (200,000)
Total long-term assets $1,200,000 $ 900,000
Total assets $1,677,000 $1,345,000
Accounts payable $ 130,000 $ 148,000
Other accrued liabilities 68,000 63,000
Income taxes payable 90,000 110,000
Total current liabilities $ 288,000 $ 321,000
Long-term bank loan payable $ 350,000 $ 300,000
Common stock $ 550,000 $ 400,000
Retained earnings 489,000 324,000
Total stockholders’ equity $1,039,000 $ 724,000
Total liabilities and stockholders’ equity $1,677,000 $1,345,000
Other information is as follows:
a. Dividends of $60,000 were declared and paid during the year.
b. Operating expenses include $50,000 of depreciation.
c. Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
1. Prepare a statement of cash flows for 2014 using the direct method in the Operating Activities section.
2. Prepare another statement of cash flows for 2014 using the indirect method in the Operating Activities section.