On the basis of the following data for Grant Co. for 2011 and the preceding year
ID: 2381815 • Letter: O
Question
On the basis of the following data for Grant Co. for 2011 and the preceding year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $56,000 and cash dividends declared of $18,000.
Explanation / Answer
Grant Co.
Statement of Cash Flows
For the Year Ended December 31, 2011
Cash Flows for Operating Activities:
Net income
$56,000
Adjustment:
Loss on sale of equipment
$5,000
Net cash flows for operating activities
$61,000
Cash Flows for Investing Activities:
Cash paid for equipment purchased
$(125,000)
Cash received for equipment sold
$15,000
Net Cash Flows for investing activities:
$(110,000)
Cash Flows for Financing Activities:
Cash paid for dividends
$(18,000)
Net cash flows for financing activities
$(18,000)
Net decrease in cash
$(67,000)
Grant Co.
Statement of Cash Flows
For the Year Ended December 31, 2011
Cash Flows for Operating Activities:
Net income
$56,000
Adjustment:
Loss on sale of equipment
$5,000
Net cash flows for operating activities
$61,000
Cash Flows for Investing Activities:
Cash paid for equipment purchased
$(125,000)
Cash received for equipment sold
$15,000
Net Cash Flows for investing activities:
$(110,000)
Cash Flows for Financing Activities:
Cash paid for dividends
$(18,000)
Net cash flows for financing activities
$(18,000)
Net decrease in cash
$(67,000)
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