Statement of Cash Flows—Direct Method
The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows:
Dec. 31, 20Y3 Dec. 31, 20Y2
Assets
Cash $237,210 $224,090
Accounts receivable (net) 87,090 79,900
Inventories 245,470 236,030
Investments 0 91,840
Land 125,820 0
Equipment 268,260 211,230
Accumulated depreciation-equipment (63,700) (56,900)
Total assets $900,150 $786,190
Liabilities and Stockholders' Equity
Accounts payable $162,620 $154,880
Accrued expenses payable 16,350 20,440
Dividends payable 8,900 7,100
Common stock, $1 par 48,000 36,950
Paid-in capital: Excess of issue price over par-common stock 182,800 106,920
Retained earnings 481,480 459,900
Total liabilities and stockholders’ equity $900,150 $786,190
The income statement for the year ended December 31, 20Y3, is as follows:
Sales $1,510,770
Cost of merchandise sold 929,120
Gross profit $581,650
Operating expenses:
Depreciation expense $6,800
Other operating expenses 492,510
Total operating expenses 499,310
Operating income $82,340
Other income:
Gain on sale of investments 15,300
Income before income tax $97,640
Income tax expense 39,060
Net income $58,580
Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:
The investments were sold for $107,140 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $37,000 debit to Retained Earnings for cash dividends declared.