Based on the Following Income Statement and Balance Sheet for Montego

question 8

Essay

Based on the following income statement and balance sheet for Montego Bay Corporation, determine the cash flows from operating activities using the direct method.
$\begin{array}{c}\text { MONTEGO BAY CORPORATION } \\\text {Income Statement } \\\text { For Year Ended December 31, 2013 } \\\begin{array}{|l|r|r|}\hline \text { Sales } & & \$ 504,000 \\\hline \text { Cost of goods sold } & 327,600 & \\\hline \text { Depreciation } & 42,000 & \\\hline \text { Other operating expenses } & 125,500 & (495,100) \\\hline \text { Other gains (losses): } & & \\\hline \quad \text { Gain on sale of equipment } & & 7,200 \\\hline \text { Income before taxes } & & 16,100 \\\hline \text { Income tax expense } & & (4,800) \\\hline \text { Net income } & & \$ 11,300\\\hline\end{array}\end{array}$

$\begin{array}{c} \text { MONTEGO BAY CORPORATION } \\ \text { Balance Sheets } \\ \text {At December 31 } \\\begin{array}{|l|r|r|}\hline &2013&2012\\\hline \text { Cash } & \$ 64,650 & \$ 55,800 \\\hline \text { Accounts receivable } & 21,000 & 29,000 \\\hline \text { Inventory } & 58,000 & 52,100 \\\hline \text { Equipment } & 240,000 & 222,000 \\\hline \text { Accumulated depreciation } & (106,000) & (96,000) \\\hline \text { Total assets } & \underline {\$ 277,650 }& \underline {\$ 262,900} \\\hline & & \\\hline \text { Liabilities: } & & \\\hline \text { Accounts payable } & \$ 28,400 & \$ 23,700 \\\hline \text { Income taxes payable } & 1,050 & \underline{1,200} \\\hline \text { Total liabilities } & \$ 29,450 & \$ 24,900 \\\hline \text { Equity: } & & \\\hline \text { Common stock } & \$ 106,000 & \$ 106,000 \\\hline \text { CC in excess } & 18,000 & 18,000 \\\hline \text { Retained earnings } & 124,200 & 114,000 \\\hline \text { Total equity } & \$ 248,200 & \$ 238,000 \\\hline \text { Total liabilities and equity } & \underline {\$ 277,650} & \underline {\$ 262,900} \\\hline\end{array}\end{array}$

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Definitions:

Performance

A measure of how effectively an individual, group, or system accomplishes its goals or tasks.

Organization

An entity comprising multiple people, such as a company, institution, or association, working together to achieve a common purpose.

Member

An individual who belongs to a group, organization, or some form of collective, often contributing towards the collective goals.

Objectives

Specific, measurable goals set by individuals or organizations to achieve desired outcomes.