ROCKER COMPANY Comparative Balance Sheet Dec. 31, 2012 Dec. 31, 2011 Assets Cash
ID: 2500174 • Letter: R
Question
ROCKER COMPANY
Comparative Balance Sheet
Dec. 31, 2012 Dec. 31, 2011
Assets
Cash $ 33,000 $10,000
Accounts receivable 18,000 14,000
Inventory 25,000 18,000
Prepaid expenses 6,000 9,000
Long-term investments -0- 18,000
Equipment 60,000 32,000
Accumulated depreciation—equipment (20,000) (14,000)
Total assets $122,000 $87,000
Liabilities and Stockholders' Equity
Accounts payable $ 17,000 $ 7,000
Bonds payable 37,000 47,000
Common stock 40,000 23,000
Retained earnings 28,000 10,000
Total liabilities and stockholders' equity $122,000 $87,000
Additional information:
1. Net income for the year ending December 31, 2012 was $33,000.
2. Cash dividends of $15,000 were declared and paid during the year.
3. Long-term investments that had a cost of $18,000 were sold for $14,000.
4. Sales for 2012 were $120,000.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2012, using the indirect method. (20 Points)
Explanation / Answer
Rocker Company Cash Flow Statement For the Year ended Dec 31, 2012 Amount($) Cash Flow from Operating activities: Net Income 33000 Add: Loss on sale of Long term Investment 4000 Add: Depreciation on Equipment 6000 Adjustment of Working Capital: Increase in Accounts Receivable -4,000 Increase in Inventory -7,000 Decrease in Prepaid Expense 3,000 Cash Flow from Opearating Activities A 45,000 Cash Flow from Investing Activities: Sale of Long term Investment 14,000 Purchase of Equipment -28,000 Cash Flow from Investing Activities B -14,000 Cash Flow from Financing Activities: Redemption of Bonds -10,000 Issue of Common Stock 17000 Cash Dividend -15,000 Cash flow from Financing Activities C -8,000 Net Cash flow for the year D=A+B+C 23,000 Opening Cash E 10,000 Closing Cash F=D+E 33,000
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