Problem 5-53

INDIRECT METHOD DIRECT METHOD

RIKER COMPANY ADDITIONAL INFO:

STATEMENT OF CASH FLOWS (INDIRECT METHOD) 1) Sales total
FOR THE YEAR ENDED DECEMBER 31, 2005 2) COGS
3) Operating expenses
Cash flows from operating activities 4) Interest expense
Net Income $ 68,850 5) Income tax expense
Adjustments $ 65,000 6) 80% Accounts Payable - Inventory pu
Depreciation expense $ 10,000 20% Accounts Payable - Operating ex
Amortization expense $ 7,400 7) Depreciation and amortization are not
Loss on sale of machine $ (2,330)
Gain on retirement of long-term debt $ (8,600)
Increase in accounts receivable $ 12,430 Cash flows from operating activities
Decrease in inventory $ 1,680 Cost of Goods Sold
Decrease in prepaid operating expenses $ (2,400)
Decrease in accounts payable $ 500
Increase in interest payable $ 2,500
Increase in income taxes payable $ 86,180
Net cash provided by operating activities $ 155,030
Cash flows from investing activities
Sale of machine $ 12,000
Purchase of fixed assets $ (78,000)
Net cash used in investing activities $ (66,000)
Cash flows from financing activities Cash flows from investing activities
Retirement of long-term debt $ (65,000) Sale of machine
Payment of dividends $ (27,000) Purchase of fixed assets
Net cash used in financing activities $ (92,000) Net cash used in investing activities
Net decrease in cash $ (2,970) Cash flows from financing activities
Cash of beginning year $ 5,320 Retirement of long-term debt
Cash of end of year $ 2,350 Payment of dividends
Net cash used in financing activities
 DIRECT METHOD

CASH FROM CUSTOMERS

SALES
$ 812,350 A/R
$ 500,000 GAIN ON LT DEBT
$ 100,000
$ 23,000 CASH TO SUPPLIER
$ 40,430 COGS
unts Payable - Inventory purchases INVTY
unts Payable - Operating expenses A/P
n and amortization are not included in COGS
CASH FOR OPERATING EXP
PREPAID
m operating activities SUPPLIES (OPEX)
ACCRUED LIAB
WAGES

CASH FOR INTEREST

INT EXP

CASH FOR TAX

TAX EXPENSE

Net cash provided by operating activiti

m investing activities DIFF
$ 12,000
f fixed assets $ (78,000)
ed in investing activities $ (66,000)
m financing activities
of long-term debt $ (65,000)
$ (27,000)
ed in financing activities $ (92,000)
$ 812,350
$ 12,430 SALES $ 812,350
$ (8,600) COGS $ (500,000)
GROSS INCOME $ 312,350
OPEX $ 100,000
$ (500,000) TAX $ 40,430
$ 1,680 NET INCOME $ 171,920
$ 3,000 $ 68,850
$ 103,070

$ (2,400)
$ (100,000)

$ (23,000)

$ (40,430)
$ 155,030
$ 155,030
$ -