Comparative balance sheets and the income statements for Ellis Company

| September 28, 2018

Comparative balance sheets and the income statements for Ellis Company are presented below:Ellis CompanyBalance SheetsDecember 31, Year 1 and Year 2Year 2Year 1AssetsCurrent assets:Cash$ 45,000$ 30,000Accounts receivable38,00040,000Inventory67,00060,000Total current assets150,000130,000Long-term investments.162,000200,000Plant and equipment278,000150,000Accumulated depreciation(52,000)(50,000)Total assets$538,000$430,000Liabilities and stockholders’ equityCurrent liabilities:Accounts payable$ 36,000$ 40,000Accrued liabilities24,00030,000Total current liabilities60,00070,000Bonds payable20,00030,000Mortgage payable100,000Deferred income taxes15,00020,000Total liabilities195,000120,000Stockholders’ equity:Common stock.295,000270,000Retained earnings48,00040,000Total stockholders’ equity343,000310,000Total liabilities and stockholders’ equity$538,000$430,000Ellis CompanyIncome StatementFor the Year Ended December 31, Year 2Sales$150,000Less cost of goods sold76,500Gross margin73,500Less operating expenses16,000Net operating income57,500Less loss on sale of investment2,500Income before taxes55,000Less income taxes22,000Net income$ 33,000Summary of transactions for Year2:* During Year 2, the company sold for cash of $35,500 long-term investments with a cost of $38,000 when purchased.* All sales were on credit.* The company paid a cash dividend of $25,000.* Bonds payable of $25,000 were retired by issuing common stock. The bonds retired were equivalent to the market value of the $25,000 stock issued.* An addition to one of the company’s buildings was completed on December 31,Year 2, at a cost of $128,000. The company gave an interest-bearing mortgage for$100,000 and paid $28,000 in cash.* Bonds payable were sold for $15,000 cash at par value.Required:a. Using the indirect method, determine the net cash provided by operating activitiesfor Year 2.b. Using the direct method, determine the net cash provided by operating activitiesfor Year 2.c. Using the net cash provided by operating activities figure from either part a or b, prepare a statement of cash flows for Year 2.

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