Question

Shamrock Company had the following information available at the end of 2014.

Please take a look at the question below and create a statement of cash flows AND a reconciliation schedule.
Prepare a statement of cash flows for Shamrock Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
2014 2013
Cash
$10,760 $3,060
Accounts receivable
20,590 13,800
Short-term investments
21,640 31,330
Inventory
41,100 36,080
Prepaid rent
2,400 13,480
Prepaid insurance
2,610 970
Supplies
1,350 830
Land
124,930 172,200
Buildings
350,040 350,040
Accumulated depreciation—buildings
(105,220)(88,110)
Equipment
524,620 400,050
Accumulated depreciation—equipment
(130,660) (113,950)
Patents
45,840 51,350
Total assets
$910,000 $871,130
Accounts payable
$22,380 $31,070
Income taxes payable
5,390 4,960
Salaries and wages payable
6,000 3,840
Short-term notes payable
10,530 10,530
Long-term notes payable
60,590 70,170
Bonds payable
400,170 400,170
Premium on bonds payable
14,314 23,820
Common stock
240,840 219,100
Paid-in capital in excess of par—common stock
25,576 17,790
Retained earnings
124,210 89,680
Total liabilities and stockholders’ equity
$910,000 $871,130
Shamrock's COMPANY
INCOME STATEMENT AND DIVIDEND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales revenue
$1,160,450
Cost of goods sold
748,980 411,470
Gross margin
Operating expenses
Selling expenses
$79,520
Administrative expenses
156,790
Depreciation/Amortization expense
39,330
Total operating expenses
275,640
Income from operations
135,830
Other revenues/expenses
Gain on sale of land
8,320
Gain on sale of short-term investment
4,390
Dividend revenue
2,500
Interest expense
(52,270)
(37,060)
Income before taxes
98,770
Income tax expense
40,350
Net income
58,420
Dividends to common stockholders
(23,890)
To retained earnings
$34,530

Answer 1

Answer and Explanation:

The preparation is presented below:

Shamrock Company

Statement of Cash Flows

For the Year Ended December 31, 2014

(Direct Method)

Cash flows from operating activities

Cash receipts:

Cash received from customers $1,153,660

Dividends received $2,500

Total cash receipts $1,156,160

Cash payments:

Cash paid to suppliers $762,690

Cash paid for operating expenses $225,230

Taxes paid $39,920

Interest paid $61,776

Total cash payments -$1,089,616

Net cash provided by operating activities $66,544

Cash flows from investing activities

Sale of short-term investments $14,080

Sale of land $55,590

Purchase of equipment -$124,570

Net cash used by investing activities -$54,900

Cash flows from financing activities

Proceeds from issuance of common stock $29,526

Principal payment on long-term debt -$9,580

Dividends paid -$23,890

Net cash used by financing activities -$3,944

Net increase in cash $7,700

Cash, January 1, 2014 $3,060

Cash, December 31, 2014 $10,760

Working notes

Sales Revenue $1,160,450

– Increase in Accounts Receivable $6,790

Cash received from customers $1,153,660

Cost of Goods Sold $748,980

+ Increase in Inventory $5,020

+ Decrease in Accounts Payable $8,690

Cash paid to suppliers $762,690

Operating Expenses $275,640

– Depreciation/Amortization Expense -$39,330

– Decrease in Prepaid Rent -$110,80

+ Increase in Prepaid Insurance $1,640

+ Increase in Office Supplies $520

– Increase in Wages Payable -$2,160

Cash paid for Operating Expenses $225,230

Income tax expense $40,350

Less:Increase in income taxes payable -$430

Taxes paid $39,920

Interest Expense $52,270

+ Decrease in Bond Premium $9,506

Interest paid $61,776

Reconciliation of Net Income to Net Cash Provided by Operating Activities:

Net income $58,420

Adjustments made to reconcile net income to net cash provided by operating activities:

Add: Depreciation expense $39,330

Add: Decrease in prepaid rent $110,80

Add: Increase in income taxes payable $430

Add: Increase in wages payable $2,160

Less: Increase in accounts receivable -$6,790

Less: Increase in inventory -$5,020

Less: Increase in prepaid insurance -$1,640

Less: Increase in office supplies -$520

Less: Decrease in accounts payable -$8,690

Less: Gain on sale of land -$8,320

Less: Gain on sale of short-term investments -$4,390

Less: Amortization of bond premium -$9,506

Total adjustments $8,124

Net cash provided by operating activities $66,544