Use the Following Information to Prepare a Statement of Cash

question 44

Essay

Use the following information to prepare a statement of cash flows (direct method) for Ames Corporation for the year ended December 31, 2015. $\begin{array}{lr}\text { Cash and cash equivalent balances: }\\12-31-2014 & \$ 26,000 \\12-31-2015 & 18,000 \\\text { Cash paid for purchase of treasury stock } & 50,000\\\text { Accepted note receivable in exchange for a computer }\\\text { that had been used in business operations } & 10,000 \\\text { Depreciation expense } & 15,000 \\\text { Cash received from customers } & 200,000 \\\text { Cash paid for operating expenses } & 75,000 \\\text { Cash paid for merchandise } & 130,000 \\\text { Cash received from dividends } & 2,000 \\\text { Cash paid for dividends } & 5,000 \\\text { Cash paid for office building } & 75,000 \\\text { Cash borrowed on a 6-month note payable } & 40,000 \\\text { Cash received from issuance of bonds payable } & 90,000 \\\text { Cash paid for bond interest expense } & 5,000\end{array}$

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Definitions:

365-Day Year

A calendar model assuming exactly 365 days in a year, commonly used for calculating interest in finance.

Discount Method

Method of computing the net price using the trade discount rate to calculate the amount of trade discount, and, subsequently, the net price.

Actual Interest Rate

The real cost of borrowing money, including all fees and interest rates, more comprehensively represented than the nominal interest rate.

Discount Rate

The percent used for calculating a trade or cash discount. The interest percent charged by the buyer of a discounted note.