The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year...

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Accounting

The Diversified Portfolio Corporation provides investment adviceto customers. A condensed income statement for the year endedDecember 31, 2018, appears below:
Service revenue $ 1,220,000
Operating expenses 900,000
Income before income taxes 320,000
Income tax expense 96,000
Net income $ 224,000

The following balance sheet information also isavailable:
12/31/18 12/31/17
Cash $ 439,000 $ 90,000
Accounts receivable 160,000 120,000
Accounts payable (operating expenses) 110,000 80,000
Income taxes payable 30,000 55,000

In addition, the following transactions took place during theyear:
Common stock was issued for $140,000 in cash.
Long-term investments were sold for $70,000 in cash. Theoriginal cost of the investments also was $70,000.
$100,000 in cash dividends was paid to shareholders.
The company has no outstanding debt, other than those payableslisted above.
Operating expenses include $50,000 in depreciationexpense.

Required:
1. Prepare a statement of cash flows for 2018 forthe Diversified Portfolio Corporation. Use the direct method forreporting operating activities.
2. Prepare the cash flows from operatingactivities section of Diversified’s 2018 statement of cash flowsusing the indirect method.

Answer & Explanation Solved by verified expert

4.4 Ratings (868 Votes)

1 DIVERSIFIED PORTFOLIO CORPORATION Statement of Cash Flows For the Year Ended December 31 2018 Cash Flows from Operating Activities Cash receipts from customers 1180000 Cash paid for operating expenses 820000 Cash paid for income taxes 121000 Net cash provided by operating activities 239000 See Answer

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Service revenue	$	1,220,000
Operating expenses		900,000
Income before income taxes		320,000
Income tax expense		96,000
Net income	$	224,000

	12/31/18		12/31/17
Cash	$	439,000	$	90,000
Accounts receivable		160,000		120,000
Accounts payable (operating expenses)		110,000		80,000
Income taxes payable		30,000		55,000