(SCF-Direct and Indirect Methods) Comparative balance sheet accounts of Sharpe c
ID: 2468610 • Letter: #
Question
(SCF-Direct and Indirect Methods) Comparative balance sheet accounts of Sharpe compare presented below. Additional data: Equipment that cost $10,000 and was 60% depreciated was sold in 2012. Cash dividends were declared and paid during the year. Common stock was issued in exchange for land. Investments that cost $35,000 were sold during the year. There were no write-offs of uncollectible accounts during the year. Sharpe's 2012 income statement is as follows. Instructions Prepare a statement of cash flows using the indirect methodExplanation / Answer
(b) cash flow from operating activity
Net income $67000
less: gain on sale (15000)
add: loss on sale 3000
Add: Depreciation(13000+9000) 22000
add: income tax provision 45000
Net income after adjustment 122000
Less:Increase in Receivable(less:doubtful) (23000)
less: increase in inventory (14000)
add: increase in accounts payable 6000
less: income tax paid (10000 +45000 -12000) (43000)
Net cash generated from operating activity 48000
Cash flow from financial activity
proceed from common stock (310000 - 260000 -15000(for exchange of land)] 35000
Payment of long term payable (8000)
Cash dividend (70000)
Net cash generated from the financial activity (43000)
Cash flow from investing activity
purhcase of equipment (at cost)[70000+10000 -48000] (32000)
sale of equipment 1000
sale of investment (35000 + 15000) 50000 Purhcase of investment(55000+35000- 85000) ( 5000)
Net cash generated from the Investing activity $14000
Net increase in cash and cash equivalent $19000
add: cash and cash equivalent beginning $51000
cash and cash equivalent ending $70000
Note:- cash dividend declare and paid :
Closing retained earning = opening retained earning + net income - dividend
92000 = 95000 + $67000 - Cash dividend
Cash dividend = 95000 + 67000 - 92000
Cash Dividend = $70000
Depreciaition charged to income statement
On Equipment (accumulated depreciation) = (60% *10000) +21000 - 14000
= $13000
On Building (accumulated depreciation ) = $37000 - $28000
= $9000
loss on sale of equipment = (cost of equipment - Accumulated depreciation ) - sale value of equipment
3000 = (10000 - 6000) - sale value
sale value = $1000
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