Preparing the statement of cash flows—direct method Use the Rolling Hills, Inc. data from Problem P14-34A. Requirements

1. Prepare the 2018 statement of cash flows by the direct method.

2. How will what you learned in this problem help you evaluate an investment?

Statement of Cash Flows

For the year ended December 31, 2018

Cash Flows From Operating Activities:

Receipts:

From customers ($25,400+$440,000-$26,500)

$438,900

Interest revenue

$8,700

Payments:

To accounts payable

($193,800)

To employees

($77,400)

To other operating expenses

($10,200)

For interest expense

($21,100)

To income tax

($20,000)

Net cash provided/ (used) in operating activities

$125,100

Cash Flows From Investing Activities:

Purchase of land

($23,600)

Net cash provided/ (used) in investing activities

($23,600)

Cash Flows From Financing Activities:

Issuance of common stock

$24,400

Payment of notes payable

($50,100)

Dividend paid

($64,600)

Net cash provided/ (used) in financing activities

($90,300)

Net increase/(Decrease) in cash

$11,200

Cash Balance, December 31, 2017

$15,700

Cash Balance, December 31, 2018

$26,900

Statement of Cash Flows (Partial)

Non-cash Investing and financing activities

Acquisition of land by issuing long-term notes payable

$21,100

Total Non-cash Investing and financing activities

$21,100