90.2K

Verified Solution

Link Copied!

The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2013, appears below:

Service revenue	$	940,000
Operating expenses		720,000
Income before income taxes		220,000
Income tax expense		66,000
Net income	$	154,000

The following balance sheet information also is available:

	12/31/13		12/31/12
Cash	$	315,000	$	72,000
Accounts receivable		124,000		102,000
Accounts payable (operating expenses)		74,000		62,000
Income taxes payable		12,000		19,000

In addition, the following transactions took place during the year:
1.	Common stock was issued for $104,000 in cash.
2.	Long-term investments were sold for $52,000 in cash. The original cost of the investments also was $52,000.
3.	$82,000 in cash dividends was paid to shareholders.
4.	The company has no outstanding debt, other than those payables listed above.
5.	Operating expenses include $32,000 in depreciation expense.

Required:
1.	Prepare a statement of cash flows for 2013 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 Diversifieds 2013 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign)

Answer & Explanation Solved by verified expert

See Answer