Based on the Following Income Statement and Balance Sheet for Montego

question 120

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.
$\begin{array}{c}\text {MONTEGO BAY CORPORATION}\\\text { Income Statement}\\\text {For Year Ended December 31, 2013}\\ \begin{array}{|l|r|r|}\hline\text { Sales } & & \$ 504,000 \\\hline \text { Cost of goods sold } & 327,600 & \\\hline \text { Depreciation } & 42,000 & \\\hline \text { Other operating expenses } & 125,500 & (495,100) \\\hline \text { Other gains (losses): } & &\\\hline\text {Gain on sale of equipment } & & 7,200 \\\hline \text {Income before taxes} & & 16,100 \\\hline\text { Income tax expense }& &(4,800) \\\hline \text {Net income }& & \$ 11,300 \\ \hline\end{array}\end{array}$

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

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