Financial information for Fesone Inc.'s balance sheet for fiscal 2018 and 2017 follows:
Additional information:
1.Preferred shares were converted to common shares during the year at their book value.
2.The face value of the bonds is $600,000; they pay a coupon rate of 6% per annum.The effective interest rate of interest is 7% per annum.
3.Net income was $205,000.
4.There was an ordinary stock dividend valued at $13,000 and cash dividends were also paid.
5.Interest expense for the year was $115,000.Income tax expense was $61,500.
6.Fesone arranged for a $425,000 bank loan to finance the purchase of the held-to-maturity investments.
7.Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8.The held-for-trading investments are not cash equivalents.
9.Sales = 2,000,000; cost of goods sold = 300,000; and,sales and administration expenses = 1,043,500
Required:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b.Explain the difference between the direct method and the indirect method.

Question

Financial information for Fesone Inc.'s balance sheet for fiscal 2018 and 2017 follows:
  Additional information:
1.Preferred shares were converted to common shares during the year at their book value.
2.The face value of the bonds is $600,000; they pay a coupon rate of 6% per annum.The effective interest rate of interest is 7% per annum.
3.Net income was $205,000.
4.There was an ordinary stock dividend valued at $13,000 and cash dividends were also paid.
5.Interest expense for the year was $115,000.Income tax expense was $61,500.
6.Fesone arranged for a $425,000 bank loan to finance the purchase of the held-to-maturity investments.
7.Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8.The held-for-trading investments are not cash equivalents.
9.Sales = 2,000,000; cost of goods sold = 300,000; and,sales and administration expenses = 1,043,500
Required:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b.Explain the difference between the direct method and the indirect method.

Quizplus · Accepted Answer

The Answer of Financial information for Fesone Inc.'s balance sheet for fiscal 2018 and 2017 follows:
  Additional information:
1.Preferred shares were converted to common shares during the year at their book value.
2.The face value of the bonds is $600,000; they pay a coupon rate of 6% per annum.The effective interest rate of interest is 7% per annum.
3.Net income was $205,000.
4.There was an ordinary stock dividend valued at $13,000 and cash dividends were also paid.
5.Interest expense for the year was $115,000.Income tax expense was $61,500.
6.Fesone arranged for a $425,000 bank loan to finance the purchase of the held-to-maturity investments.
7.Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8.The held-for-trading investments are not cash equivalents.
9.Sales = 2,000,000; cost of goods sold = 300,000; and,sales and administration expenses = 1,043,500
Required:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b.Explain the difference between the direct method and the indirect method.

Financial Information for Fesone Inc