Answer and Explanation:
The preparation is presented below:
Shamrock Company
Statement of Cash Flows
For the Year Ended December 31, 2014
(Direct Method)
Cash flows from operating activities
Cash receipts:
Cash received from customers $1,153,660
Dividends received $2,500
Total cash receipts $1,156,160
Cash payments:
Cash paid to suppliers $762,690
Cash paid for operating expenses $225,230
Taxes paid $39,920
Interest paid $61,776
Total cash payments -$1,089,616
Net cash provided by operating activities $66,544
Cash flows from investing activities
Sale of short-term investments $14,080
Sale of land $55,590
Purchase of equipment -$124,570
Net cash used by investing activities -$54,900
Cash flows from financing activities
Proceeds from issuance of common stock $29,526
Principal payment on long-term debt -$9,580
Dividends paid -$23,890
Net cash used by financing activities -$3,944
Net increase in cash $7,700
Cash, January 1, 2014 $3,060
Cash, December 31, 2014 $10,760
Working notes
Sales Revenue $1,160,450
– Increase in Accounts Receivable $6,790
Cash received from customers $1,153,660
Cost of Goods Sold $748,980
+ Increase in Inventory $5,020
+ Decrease in Accounts Payable $8,690
Cash paid to suppliers $762,690
Operating Expenses $275,640
– Depreciation/Amortization Expense -$39,330
– Decrease in Prepaid Rent -$110,80
+ Increase in Prepaid Insurance $1,640
+ Increase in Office Supplies $520
– Increase in Wages Payable -$2,160
Cash paid for Operating Expenses $225,230
Income tax expense $40,350
Less:Increase in income taxes payable -$430
Taxes paid $39,920
Interest Expense $52,270
+ Decrease in Bond Premium $9,506
Interest paid $61,776
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income $58,420
Adjustments made to reconcile net income to net cash provided by operating activities:
Add: Depreciation expense $39,330
Add: Decrease in prepaid rent $110,80
Add: Increase in income taxes payable $430
Add: Increase in wages payable $2,160
Less: Increase in accounts receivable -$6,790
Less: Increase in inventory -$5,020
Less: Increase in prepaid insurance -$1,640
Less: Increase in office supplies -$520
Less: Decrease in accounts payable -$8,690
Less: Gain on sale of land -$8,320
Less: Gain on sale of short-term investments -$4,390
Less: Amortization of bond premium -$9,506
Total adjustments $8,124
Net cash provided by operating activities $66,544
