Selected Data and Additional Information from the Company's Records Are

question 123

Essay

Selected data and additional information from the company's records are presented below:
$\begin{array}{lrr} \underline{\text { Balance Sheet Data }} & \underline{\text { Year 2 }} & \underline{\text { Year 1 }} \\\text { Cash } & \$ 235,000 & 246,000 \\\text { Accounts receivable } & \$ 120,000 & \$ 150,000 \\\text { Inventories } & 56,000 & 50,000 \\\text { Accounts payable } & 38,000 & 70,000 \\\text { Salaries payable } & 10,000 & 5,000 \\\text { Equipment } & 110,000 & 70,000 \\\text { Accumulated depreciation } & 28,000 & 32,000 \\\text { Bonds payable } & 100,000 & 200,000 \\\text { Common shares } & 300,000 & 200,000 \\\text { Retained earnings } & 76,000 & 40,000\end{array}$

$\begin{array}{lr} \underline{\text { Income Statement Data }} & \underline{ \text { Year 2 }} \\ \text { Net sales } & \$ 920,000 \\\text { Cost of goods sold } & 700,000 \\\text { Operating expenses (excluding depreciation expense) } & 160,000 \\\text { Net income (including depreciation expense and gain) } & 56,000 \\\text { Gain on sale of equipment } & 4,000\end{array}$
Additional information:
1. Equpment with a cost of $30,000 and abogk value of \$18,000 was sald for $22,000 during Year 2.

2. Common shares were issued to retire bonds payable during Year 2.

3. The only items affecting retained earnings in Year 2 were net income and dividends declared and paid.
-Refer to Mary Kay Cosmetics.Prepare the operating activities section of a statement of cash flows for Year 2 assuming the use of the indirect method of determining net cash flow from operating activities.

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