The following information relates to a capital lease between Bradford Electric Co. (lessee) and Widstoe Manufacturing Inc. (lessor). The lease term began on January 1, 2008.Widstoe recorded the lease as a sale and made the following entries related to the lease during 2008. Assume this was the only lease Widstoe had during the year.
| Jan 1 | Deferred Initial Direct Costs | 6,000 | |
| Cash | 6,000 | ||
| 1 | Lease Payments Receivable | 88,000 | |
| Sales | 88,000 | ||
| 1 | Cost of Goods Sold | 70,000 | |
| Inventory | 64,000 | ||
| Deferred Initial Direct Costs | 6,000 | ||
| 1 | Cash | 11,132 | |
| Lease Payments Receivable | 11,132 | ||
| Dec 31 | Cash | 11,132 | |
| Lease Payments Receivable | 11,132 | ||
| 31 | Lease Payments Receivable | 6,242 | |
| Interest Revenue | 6,242 |
1. Prepare the partial Operating Activities section of the statement of cash flows for 2008 for Widstoe Manufacturing Inc. under the indirect method. Widstoe reported net income of $148,504 inclusive of the lease revenue in the preceding entries.
2. Prepare the partial Operating Activities section of the statement of cash flows for 2008 for Widstoe Manufacturing Inc. under the direct method. Assume that cash provided by operating activities exclusive of the lease transactions is $124,262.
