Avatar Auto Parts Company Uses the Direct Method to Prepare

question 125

Essay

Avatar Auto Parts Company uses the direct method to prepare its statement of cash flows.Refer to the following financial statement information for the year ending December 31,2015:
Additional information provided by the company includes the following:
Equipment costing $60,000 was purchased for cash.
Equipment with a net asset value of $10,000 was sold for $16,000
During 2014,the company repaid $43,000 of Long-Term Notes Payable.
During 2014,the company borrowed $34,000 on a new Note Payable
There were no stock retirements during the year.
There were no sales of Treasury Stock during the year.
Prepare a complete statement of cash flows using the direct method.
Assume Accrued Liabilities relate to Other Operating Expense

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Definitions:

Enforceable Security Interest

A legal claim or lien on collateral that secures the fulfillment of a debt or obligation, which can be enforced in court.

Escrow

A financial arrangement where a third-party holds and regulates payment of the funds required for two parties involved in a given transaction, ensuring fair and secure dealing.

Collateral

An asset offered as security for a loan, which can be seized by the lender if the borrower defaults on the loan payments.

Security Agreement

A legal document that secures an interest in collateral for a lender in a secured transaction.