During 2011, Groton sold some equipment for $26 that had cost $41 and on which t

Question

    

     During 2011, Groton sold some equipment for $26 that had cost $41 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $6 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.

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.)

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.)

A comparative balance sheet and income statement for Groton Company follow:

Explanation / Answer

Answer:

Cash flow from operating activities Net Income 65 Adjustments Add: Depreciation 4 Add: Loss on sale of equipment 5 Less: Gains -7 Increase in accounts receivable -89 Decrease in inventory 51 Decrease in prepaid expenses 2 increase in accounts payable 76 Decrease in accrued liabilities -10 Increase in income tax payable 9 41 Cash flow from operating activities 106 Cash flow from investing activities Sale of equipment 26 Sale of long term investment 13 Cash flow from investing activities 39 Cash flow from financing activities Cash dividends -39 Retirement of stock -117 Cash flow from financing activities -156 Changes in cash -11 Beginning cash balance 19 Ending cash balance 8

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