A comparative balance sheet and income statement for Groton Company follow: Grot
ID: 2435220 • Letter: A
Question
A comparative balance sheet and income statement for Groton Company follow:
Groton Company
Comparative Balance Sheet
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 5 $ 16
Accounts receivable 322 237
Inventory 166 208
Prepaid expenses 16 14
Total current assets 509 475
Property, plant, and equipment 517 438
Less accumulated depreciation (89) (75)
Net property, plant, and equipment 428 363
Long-term investments 29 40
Total assets $ 966 $ 878
Liabilities and Stockholders' equity
Accounts payable $ 305 $ 229
Accrued liabilities 74 84
Income taxes payable 80 71
Total current liabilities 459 384
Bonds payable 206 180
Total liabilities 665 564
Common stock 171 210
Retained earnings 130 104
Total stockholders’ equity 301 314
Total liabilities and stockholders' equity $ 966 $ 878
Groton Company
Income Statement
For the Year Ended December 31, 2011
Sales $ 764
Cost of goods sold 450
Gross margin 314
Selling and administrative expenses
220
Net operating income 94
Non operating items:
Gain on sale of investments $ 5
Loss on sale of equipment (3) 2
Income before taxes 96
Income taxes
31
Net income $ 65
During 2011, Groton sold some equipment for $18 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $16 that had cost $11 when purchased several years ago. A cash dividend was paid during 2011 and the company repurchased $39 of its own stock. Groton did not retire any bonds during 2011.
Required:
1.
Using the indirect method, determine the net cash provided by/used by operating activities for 2011. (Negative amount should be entered with a minus sign.)
2.
Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Amounts to be deducted and negative amounts should be indicated with a minus sign.)
Explanation / Answer
1. Net cash provided by operating activities $117
2.
Groton Company Statement of Cash Flows - Indirect Method For the Year Ended December 31, 2011 Cash Flows from Operating Activities: Net income 65 Adjustments to convert net income to cash basis: Depreciation expense [$89 - ($75 - $10)] 24 Gain on sale of investments -5 Loss on sale of equipment 3 Increase in Accounts Receivable -85 Decrease in Inventory 42 Increase in Prepaid expenses -2 Increase in Accounts payable 76 Decrease in Accrued liabilities -10 Increase in Income taxes payable 9 52 Net cash provided by operating activities 117 Cash Flows from Investing Activities: Sale proceeds of equipment 18 Sale of long-term investments 16 Purchase of equipment [$517 - ($438 - $31)] -110 Net cash used by investing activities -76 Cash Flows from Financing Activities: Issuance of bonds payable 26 Repurchase of Common stock -39 Payment of cash dividends [($104 + $65) - $130] -39 Net cash used by financing activities -52 Net increase (decrease) in cash -11 Cash balance, December 31, 2010 16 Cash balance, December 31, 2011 5Related Questions
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