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

question 158

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 the statement of cash flows for Year 2 assuming the direct method is used to determine net cash flow from operating activities.

---

Definitions:

Reasonable Doubt

The standard of proof required in criminal cases for a jury or judge to legally find the defendant guilty; doubt based on reason and common sense.

Securities Laws

Securities laws are legislations and regulations designed to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation, governing the creation and trading of securities.

Securities Act

A law aimed at regulating the offer and sale of securities to protect investors from fraud.

Securities Exchange Act

A federal law governing the trading of securities, such as stocks and bonds, to protect investors against malpractices.