Comparative Balance Sheets and the Income Statements for Ellis Corporation

question 31

Essay

Comparative balance sheets and the income statements for Ellis Corporation are presented below: The following additional information is available for the year:
* During the year, the company sold long-term investments for $35,500 that had been purchased for $38,000.
* The company did not sell any property, plant, and equipment during the year or repurchase any of its own common stock.
* All sales were on credit.
* The company paid a cash dividend of $25,000.
* The company paid cash to retire $15,000 of bonds payable.
Required:
a. Using the indirect method, determine the net cash provided by operating activities.
b. Using the direct method, determine the net cash provided by operating activities.
c. Using the net cash provided by operating activities amount from either part a or b, prepare a statement of cash flows.

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Definitions:

Average Variable Cost

The total variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Profit Maximization

The method used by a company to establish the price and quantity of production that generates the maximum profit.

Lowest Output

The minimum amount of goods or services produced by an entity under given conditions.

Shut Down

A short-term decision by a firm to cease operations because current operation is not covering variable costs.