Question

The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year...

The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2018, appears below:

Service revenue $ 1,200,000
Operating expenses 890,000
Income before income taxes 310,000
Income tax expense 93,000
Net income $ 217,000


The following balance sheet information also is available:

12/31/18 12/31/17
Cash $ 429,000 $ 89,000
Accounts receivable 158,000 119,000
Accounts payable (operating expenses) 108,000 79,000
Income taxes payable 29,000 53,000


In addition, the following transactions took place during the year:

Common stock was issued for $138,000 in cash.

Long-term investments were sold for $69,000 in cash. The original cost of the investments also was $69,000.

$99,000 in cash dividends was paid to shareholders.

The company has no outstanding debt, other than those payables listed above.

Operating expenses include $49,000 in depreciation expense.


Required:
1. Prepare a statement of cash flows for 2018 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities.
2. Prepare the cash flows from operating activities section of Diversified’s 2018 statement of cash flows using the indirect method.

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