On the basis of the following data for Branch Co. for the year ended December 31
ID: 2345052 • Letter: O
Question
On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities.Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000.
Year Year
2011 2010
Cash $65,000 $ 54,000
Accounts receivable (net) 78,000 85,000
Inventories 106,500 90,000
Land -- 20,000
Equipment 495,000 370,000
Accumulated depreciation (215,000) (158,000)
$529,500 $461,000
Accounts payable (merchandise creditors)$ 53,500 $ 55,000
Common stock, $10 par 200,000 170,000
Paid-in capital in excess of par--
common stock 62,000 60,000
Retained earnings 214,000 176,000
Total $529,500 $461,000
Explanation / Answer
Cash flows from operating activities:
Net income
56,000
Plus Depreciation
57000
Plus decrease in AR
7000
Minus increase in inventories
-16500
Minus decrease in AP
-1500
Add loss on sale of land
5000
Cash provided by operating activies
107,000
Cash flows from investing activities:
Purcashe of equipment
-125000
Sale of land
15000
Cash used by financing activities
-110000
Cash flows from financing activities:
Sale of common stock
32000
Dividend paid
-18000
Cash provided financing activitie
14000
Net increas in cash
11,000
Cash balance at prior year end
54000
Cash balance at current year end
65,000
Cash flows from operating activities:
Net income
56,000
Plus Depreciation
57000
Plus decrease in AR
7000
Minus increase in inventories
-16500
Minus decrease in AP
-1500
Add loss on sale of land
5000
Cash provided by operating activies
107,000
Cash flows from investing activities:
Purcashe of equipment
-125000
Sale of land
15000
Cash used by financing activities
-110000
Cash flows from financing activities:
Sale of common stock
32000
Dividend paid
-18000
Cash provided financing activitie
14000
Net increas in cash
11,000
Cash balance at prior year end
54000
Cash balance at current year end
65,000
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