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Financial statements for E-Perform Inc follow:
E-Perform, Inc
Balance Sheet
December 31
| 2009 | 2008 | |
| Assets | ||
| Cash | $97,800 | $48,400 |
| Accounts Receivable | 75,800 | 43,000 |
| Inventories | 122,500 | 92,850 |
| Prepaid Expenses | 38,400 | 26,000 |
| Available-for-Sale Securities | 128,000 | 114,000 |
| Property, plant and equipment | 270,000 | 242,500 |
| Accumulated Depreciation | (50,000) | (52,000) |
| Total Assets | $682,500 | $514,750 |
| Liabilities and Shareholders’ Equity | ||
| Accounts Payable | $93,000 | $77,300 |
| Accrued Expenses Payable | 11,500 | 7,000 |
| Notes Payable | 110,000 | 150,000 |
| Common Shares | 220,000 | 175,000 |
| Retained Earnings | 234,000 | 105,450 |
| Accumulated other comprehensive income | 14,000 | 0 |
| Total liabilities and shareholders’ equity | $682,500 | $514,750 |
Statement of Earnings:
| Sales | $492,780 | |
| Cost of Goods Sold | 185,460 | |
| Gross Profit | 307,320 | |
| Operating Expenses | ||
| Other operating expenses | $62,410 | |
| Depreciation expense | 46,500 | 108,910 |
| Earnings from operations | 198,410 | |
| Other expenses | ||
| Interest expense | $4,730 | |
| Loss on sale of equipment | 7,500 | 12,230 |
| Earnings before income tax | 186,180 | |
| Income tax expense | 45,000 | |
| Net Earnings | $141,180 |
Additional Information:
1. The available-for-sale securities were revalued to their fair value of $128,000 at the end of 2009.
2. New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 note payable
3. Old equipment having an original cost of $57,500 was sold for $1,500
4. Accounts payable relate only to merchandise creditors
5. Notes payable were repaid during the year
**Instructions: Prepare the cash flow statement using the direct method.
Expert Answer
| E – Perform, Inc | ||
| Statement of Cash Flow (Direct Method) | ||
| For the year ended 31 December | ||
| Cash flows from operating activities: | Amount | Amount |
| Cash Receipts from customers * | 459,980 | |
| Cash Payments | ||
| To Suppliers** | 199,410 | |
| For Prepaid Expenses | 12,400 | |
| For Operating Expenses | 62,410 | |
| For Accrued expenses | (4,500) | |
| For Income Tax | 45,000 | 314,720 |
| Net cash provided by operating activities | 145,260 | |
| Cash Flow from Investing Activities: | ||
| Sale of Equipment | 1,500 | |
| Purchase of equipment | (25,000) | |
| Net cash provided by investing activities | (23,500) | |
| Cash Flow from Financing Activities: | ||
| Interest Expenses | (4,730) | |
| Repayment of Notes Payables | (100,000) | |
| Payment of cash Dividend*** | (12,630) | |
| Issue of common shares | 45,000 | |
| Net cash used by financing activities | (72,360) | |
| Net Increase in cash | 49,400 | |
| Cash balance | 48,400 | |
| Closing cash Balance | 97,800 | |
Explanations:
*Cash receipts from customers = Sales – Increase in accounts receivables
*Cash receipts from customers = $492,780 – $32,800
*Cash receipts from customers = $459,980
**Cash payments to suppliers = Cost of goods sold + Increase in inventories – Increase in accounts payable
**Cash payments to suppliers = $185,460 + $29,650 – $15,700
**Cash payments to suppliers = $199,410
***Payment of cash dividends = $105,450 + $141,180 – $234,000 = $12,630
