Acc423 Intermediate Accounting: P23-6 Comparative balance sheet accounts of Marcus Inc

Acc423 Intermediate Accounting
P23-6 (SCF-Indirect Method, and Net Cash Flow from Operating Activities, Direct Method)
Comparative balance sheet accounts of Marcus Inc. are presented below.
MARCUS INC.
COMPARATIVE BALANCE SHEET ACCOUNTS
AS OF DECEMBER 31, 2012 AND 2011
December 31
Debit Accounts 2012 2011
Cash 42,000 33,750
Accounts Receivable 70,500 60,000
Inventory 30,000 24,000
Investments (available-for-sale) 22,250 38,500
Machinery 30,000 18,750
Buildings 67,500 56,250
Land 7,500 7,500
$269,750 $238,750

Credit Accounts
Allowance for Doubtful Accounts 2,250 1,500
Accumulated Depreciation—Machinery 5,625 2,250
Accumulated Depreciation—Buildings 13,500 9,000
Accounts Payable 35,000 24,750
Accrued Payables 3,375 2,625
Long-Term Notes Payable 21,000 31,000
Common Stock, no-par 150,000 125,000
Retained Earnings 39,000 42,625
$269,750 $238,750

Additional data (ignoring taxes):
1. Net income for the year was $42,500.
2. Cash dividends declared and paid during the year were $21,125.
3. A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized.
4. Investments that cost $25,000 were sold during the year for $28,750.
5. Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.

Marcus’s 2012 income statement follows (ignoring taxes).
Sales 540,000
Less: cost of goods sold 380,000
Gross margin 160,000
Less: Operating expenses (includes $8,625 depreciation and $5,400 bad debts) 120,450
Income from operations 39,550
Other: Gain on sale of investments 3,750
Loss on sale of machinery (800) 2,950
Net income $42,500

Instructions:
(a)Compute net cash flow from operating activities using the direct method.
(b)Prepare a statement of cash flows using the indirect method.
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