Using the indirect method, prepare a statement of cash flows for this year. The
ID: 2361392 • Letter: U
Question
Using the indirect method, prepare a statement of cash flows for this year.
The following additional information is available about the company?s activities during this year: a. The company declared and paid a cash dividend this year. b. Bonds with a principal balance of $393,000 were repaid during this year. c. Equipment was sold during this year for $76,500. The equipment had cost $156,000 and had $55,600 in accumulated depreciation on the date of sale. d. Long-term investments were sold during the year for $136,000. These investments had cost $61,700 when purchased several years ago. e. The subsidiaries did not repay any outstanding loans during the year.f. Alcorn did not repurchase any of its own stock during the year.The company reported net income this year as follows:
Alcorn Company
Income Statement Sales $ 3,260,000 Cost of goods sold 2,021,200 Gross margin 1,238,800 Selling and administrative expenses
998,900 Net operating income 239,900 Nonoperating items: Gain on sale of investments $ 74,300 Loss on sale of equipment 23,900 50,400 Income before taxes 290,300 Income taxes
93,000 Net income $ 197,300 Required: 1.
Using the indirect method, prepare a statement of cash flows for this year.
Explanation / Answer
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 flow 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 only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000. 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 (merch. credit)... $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 $ 529,500... $ 461,000 Branch Company Statement of Cash Flows For the Year Ended December 31, 2011 Cash Flows for Operating Activities: Net income $56,000 Items to reconcile net income to cash flows for operating activities Depreciation expense $57,000 Loss on sale of land $5,000 Decrease in accounts receivable $7,000 Increase in inventories ($16,500) Decrease in accounts payable ($1,500) Net cash flows for operating activities $107,000 Cash Flows for Investing Activities: Cash paid for equipment purchased ($125,000) Cash received for land sold $15,000 Net cash flows for investing activities ($110,000) Cash Flows for Financing Activities: Cash received for common stock issued $32,000 Cash paid for dividends ($18,000) Net cash flows for financing activities $14,000 Net Increase in Cash $11,000 Cash balance - January 1 $54,000 Cash balance - December 31 $65,000
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