B-16.09 Rearranging cash flows in good form – direct approach

Following is an incorrectly prepared statement of cash flows for Herman Corporation. Review and correct this presentation, using a direct approach. HERMAN CORPORATION Statement of Cash Flows For the Year Ending December 31, 20X2 Cash balance at January 1, 20X2: $ 175,000 Cash receipts during 20X2: Sale of building $ 800,000 Dividend received on investments 10,000 Cash received from customers 2,350,000 Proceeds from issuing stock 1,400,000 4,560,000 Cash payments during 20X2: Purchase of inventory $ 760,000 Interest on loans 56,000 Income taxes 124,000 Repayment of long-term note payable 2,000,000 Purchase of equipment 435,000 Selling and administrative expenses 696,000 Dividends on common 175,000 (4,246,000) Cash balance at December 31, 20X2 $ 489,000 Noncash investing/financing activities: Bought land by issuing promissory note payable $ 450,00

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