Problem: Condensed financial data of Fairchild Company for 2010 and 2009 are presented below.
FAIRCHILD COMPANY
Comparative Balance Sheet
as of December 31 2010 and 2009
|
2010
|
2009
|
|
Cash
|
$1,800
|
$1,100
|
|
Receivables
|
1,750
|
1,300
|
|
Inventory
|
1,600
|
1,900
|
|
Plant assets
|
1,900
|
1,700
|
|
Accumulated depreciation
|
(1,200)
|
(1,170)
|
|
Long-term investments (Held-to-maturity)
|
1,300
|
1,470
|
|
$7,150
|
$6,300
|
|
|
|
|
Accounts payable
|
$1,200
|
$ 800
|
|
Accrued liabilities
|
200
|
250
|
|
Bonds payable
|
1,400
|
1,650
|
|
Capital stock
|
1,900
|
1,700
|
|
Retained earnings
|
2,450
|
1,900
|
|
$7,150
|
$6,300
|
FAIRCHILD COMPANY
Income Statement
For the year ended December 31, 2010
|
Sales
|
$6,900
|
|
Cost of goods sold
|
4,700
|
|
Gross margin
|
2,200
|
|
Selling and administrative expense
|
930
|
|
Income from operations
|
1,270
|
|
Other revenues and gains
|
|
|
Gain on sales of investments
|
80
|
|
Income before tax
|
1,350
|
|
Income tax expense
|
540
|
|
Net income
|
$810
|
Additional information:
During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2010. Cash dividends were $260.
Instructions:
a) Complete the statement of cash flows using the indirect method.
b) Complete the statement of cash flows using the direct method.