cashflow

23

The Statement of Cash Flows—
Direct Method

DEMONSTRATION PROBLEM
The financial statements of Bolero Corporation follow.

Copyright © Houghton Mifflin Company. All rights reserved.

1

Bolero Corporation
Income Statement
For Year Ended June 30, 2005
Revenue from Sales:
Sales
Less Sales Returns and
Allowances
Net Sales
Cost of Good Sold:
Merchandise Inventory,
July 1, 2004
Purchases
Less: Purchases Returns and
Allowances
Purchases Discounts

$570,960.00
12,960.00
$558,000.00

$163,200.00
$372,720.00
$6,360.00
5,520.00

Net Purchases
Add Freight In
Delivered Cost of Purchases
Cost of Goods Available for Sale
Less Merchandise Inventory,
June 30, 2005
Cost of Good Sold
Gross Profit
Operating Expenses:
Salary Expense
Payroll Tax Expense
Advertising Expense
Depreciation Expense, Building
Depreciation Expense, Equipment
Supplies Expense
Insurance Expense
Miscellaneous Expense
Total Operating Expenses
Income from Operations
Other Income:
Interest Income
Other Expenses:
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income

Copyright © Houghton Mifflin Company. All rights reserved.

11,880.00
$360,840.00
18,360.00
379,200.00
$542,400.00
170,400.00
372,000.00
$186,000.00
$ 88,200.00
9,780.00
4,260.00
14,400.00
8,400.00
1,920.00
1,260.00
840.00
129,060.00
$ 56,940.00
$

840.00
12,000.00

11,160.00
$ 45,780.00
11,880.00
$ 33,900.00

2

Bolero Corporation
Statement of Retained Earnings
For Year Ended June 30, 2005
Unappropriated Retained Earnings
Unappropriated Retained Earnings,
July 1, 2004
Net Income for the Year
Less: Cash Dividends Declared
Transfer to Appropriations for Plant
Expansion (see below)
Unappropriated Retained Earnings,
June 30, 2005
Appropriated Retained Earnings:
Appropriated for Plant Expansion
July 1, 2004
Add Appropriation for the Year (see above)
Retained Earnings Appropriated,
June 30, 2005
Total Retained Earnings