The following information relates to Dunwoody Nursery & Garden Center, Inc. The
ID: 2436337 • Letter: T
Question
The following information relates to Dunwoody Nursery & Garden Center, Inc. The company leases a building adjacent to its land.
Dunwoody Nursery & Garden Center, Inc.
Comparative Balance Sheets
2011 December 31 and 2010
Net income was $ 97,500 for the year.
Fully depreciated equipment costing $ 15,000 was sold for $ 3,750 (a gain of $ 3,750), and equipment costing $ 112,500 was purchased for cash.
Depreciation expense for the year was $ 30,000.
Land was purchased, $ 60,000.
An additional 7,500 shares of common stock were issued for cash at $ 20 per share (total proceeds, $ 150,000).
Cash dividends of $ 60,000 were declared and paid.
Prepare a statement of cash flows under the indirect method.
2011 2010 Assets Cash $44,500 $ 52,000 Accounts receivable, net 59,000 60,000 Merchandise inventory 175,000 120,000 Equipment 412,500 315,000 Accumulated depreciation – equipment (120,000) (105,000) Land 75,000 15,000 Total assets $646,000 $457,000 Liabilities and stockholders’ equity Accounts payable $ 43,750 $40,750 Accrued liabilities payable 2,250 3,750 Capital stock – common – $10 par 375,000 300,000 Paid-in capital in excess of par 150,000 75,000 Retained earnings 75,000 37,500 Total liabilities and stockholders’ equity $646,000 $457,000Explanation / Answer
Answers
2011
2010
Increase (Decrease) in 2011
Assets
Cash
$ 44,500.00
$ 52,000.00
$ (7,500.00)
Accounts receivable, net
$ 59,000.00
$ 60,000.00
$ (1,000.00)
Merchandise inventory
$ 175,000.00
$ 120,000.00
$ 55,000.00
Equipment
$ 412,500.00
$ 315,000.00
$ 97,500.00
Accumulated depreciation – equipment
$ (120,000.00)
$ (105,000.00)
$ (15,000.00)
Land
$ 75,000.00
$ 15,000.00
$ 60,000.00
Total assets
$ 646,000.00
$ 457,000.00
$ 189,000.00
Liabilities and stockholders’ equity
$ -
Accounts payable
$ 43,750.00
$ 40,750.00
$ 3,000.00
Accrued liabilities payable
$ 2,250.00
$ 3,750.00
$ (1,500.00)
Capital stock – common – $10 par
$ 375,000.00
$ 300,000.00
$ 75,000.00
Paid-in capital in excess of par
$ 150,000.00
$ 75,000.00
$ 75,000.00
Retained earnings
$ 75,000.00
$ 37,500.00
$ 37,500.00
Total liabilities and stockholders’ equity
$ 646,000.00
$ 457,000.00
$ 189,000.00
Cash Flows from Operating Activities
Net Income
$ 97,500.00
Adjustments to reconcile Net Income
Depreciation expense
$ 30,000.00
Decrease in Accounts receivables
$ 1,000.00
Increase in inventories
$ (55,000.00)
Gain on sale of Investments
$ (3,750.00)
Increase in Accounts payable
$ 3,000.00
Decrease in Accrued Liabilities
$ (1,500.00)
$ (26,250.00)
Net Cash flow from Operating activities
$ 71,250.00
Cash Flows from Investing Activities
Sale of Equipment
$ 3,750.00
Purchase of Equipment
$ (112,500.00)
Purchase of Land
$ (60,000.00)
Net Cash flow from Investing activities
$ (168,750.00)
Cash flows from Financing activities
Issue of Common Stock
$ 150,000.00
Dividends paid
$ (60,000.00)
Net Cash flows from Financing activities
$ 90,000.00
Increase (Decrease) in Cash
$ (7,500.00)
Cash at Beginning
$ 52,000.00
Cash at the end
$ 44,500.00
2011
2010
Increase (Decrease) in 2011
Assets
Cash
$ 44,500.00
$ 52,000.00
$ (7,500.00)
Accounts receivable, net
$ 59,000.00
$ 60,000.00
$ (1,000.00)
Merchandise inventory
$ 175,000.00
$ 120,000.00
$ 55,000.00
Equipment
$ 412,500.00
$ 315,000.00
$ 97,500.00
Accumulated depreciation – equipment
$ (120,000.00)
$ (105,000.00)
$ (15,000.00)
Land
$ 75,000.00
$ 15,000.00
$ 60,000.00
Total assets
$ 646,000.00
$ 457,000.00
$ 189,000.00
Liabilities and stockholders’ equity
$ -
Accounts payable
$ 43,750.00
$ 40,750.00
$ 3,000.00
Accrued liabilities payable
$ 2,250.00
$ 3,750.00
$ (1,500.00)
Capital stock – common – $10 par
$ 375,000.00
$ 300,000.00
$ 75,000.00
Paid-in capital in excess of par
$ 150,000.00
$ 75,000.00
$ 75,000.00
Retained earnings
$ 75,000.00
$ 37,500.00
$ 37,500.00
Total liabilities and stockholders’ equity
$ 646,000.00
$ 457,000.00
$ 189,000.00
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