Statement of Cash Flows—Direct Method

Statement of Cash Flows—Direct Method

Using the information given in Exercise 21-16, prepare a statement of cash flows for 2008 for Germaine Company using the direct method.

Exercise 21-16

Preparing a Complete Statement of Cash Flows

The following are financial statements for Germaine Company:

Germaine Company
Comparative Balance Sheet
December 31, 2008 and 2007
(Dollars in thousands)
	2008	2007
Assets
Cash	$22	$16
Accounts receivable	225	245
Inventory	105	125
Prepaid general expenses	21	12
Plant assets	1,025	1,000
Accumulated depreciation—plant assets	(530)	(585)
Total assets	$ 868	$ 813
Liabilities and Stockholders’ Equity
Accounts payable	$70	$45
Interest payable	15	12
Income taxes payable	80	77
Bonds payable	105	97
Common stock	362	354
Retained earnings	236	228
Total liabilities and stockholders’ equity	$ 868	$ 813

Germaine Company Condensed Income Statement For the Year Ended December 31, 2008 (Dollars in thousands)
Sales		$1,450
Cost of goods sold		990
Gross profit		$460
Operating expenses:
Depreciation expense	$55
General expenses	340
Interest expense	12
Income tax expense	15	422
Net income		$38

The following information is also available for 2008:

(a) Plant assets were sold for their book value of $180 during the year. The assets had an original cost of $290.

(b) Cash dividends totaling $30 were paid during the year.

(d) All purchases of plant assets were cash transactions.

Statement of Cash Flows—Direct Method A+ Tutorial use as Guide

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