ScholarMatic: Explanation & Answer
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The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2016, appears below: |
| Service revenue | $ | 960,000 |
| Operating expenses | 730,000 | |
| Income before income taxes | 230,000 | |
| Income tax expense | 46,000 | |
| Net income | $ | 184,000 |
| The following balance sheet information also is available: |
| 12/31/16 | 12/31/15 | |||
| Cash | $ | 348,000 | $ | 73,000 |
| Accounts receivable | 126,000 | 103,000 | ||
| Accounts payable (operating expenses) | 76,000 | 63,000 | ||
| Income taxes payable | 13,000 | 21,000 |
| In addition, the following transactions took place during the year: | |
| 1. | Common stock was issued for $106,000 in cash. |
| 2. |
Long-term investments were sold for $53,000 in cash. The original cost of the investments also was $53,000. |
| 3. | $83,000 in cash dividends was paid to shareholders. |
| 4. | The company has no outstanding debt, other than those payables listed above. |
| 5. | Operating expenses include $33,000 in depreciation expense. |
| Required: | |
| 1. |
Prepare a statement of cash flows for 2016 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities. (Amounts to be deducted should be indicated with a minus sign.) |
| 2. |
Prepare the cash flows from operating activities section of Diversified’s 2016 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) |
ScholarMatic: Explanation & Answer
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