Additional info: 1. They sold $20,000 equipment costing $50,000 with $36,000 in

Question

Additional info:

1. They sold $20,000 equipment costing $50,000 with $36,000 in Accumulated Depreciation.

2. All transactions related to plat assets, investment, long-term debt, dividends, and common stock only involve cash.

3. Dividends were declared and paid to common stockholders during the year. No shares were repurchased.

4. No new debt was issued and no land sold during 2011.

Question: Prepare the Statement of Cash Flows using indirect method.

Dec. 31, 2010 Dec. 31, 2011 Assets Current Assets: Cash and cash equivalents Accounts Receivable, net Inventory Total Current Assets Land Property & Equipment - at cost Less Accumulated depreciation Net Property & Equipment Total Assets Liabilities and Equity Current Liabilities: Accounts payable - trade Interest Payable Total Current Liabilities $52,000 168,000 212,000 432,000 97,000 300,000 (170,000) 130,000 $659,000 $63,000 157,000 214,000 434,000 107,000 333,000 (182,000) 151,000 $692,000 $78,000 8,000 86,000 $83,000 7,000 90,000 Note Payable Common Stock Retained Earnings 100,000 350,000 123,000 80,000 375,000 147,000 $659,000 $692,000 $800,000 Total Liabilities and Stockholders' Equity For year ended December 31, 2011 Revenues Expenses Cost of Goods Sold Wages and Salaries Expense Depreciation Expense Interest Expense Income Tax Expense Total Plus: Gain on Sale of Equipment Net Income 451,800 200,000 48,000 7,200 25,000 (732,000) 6,000 $74,000

Explanation / Answer

Statement of cash flow Cash flows from operating activities Net Income $74,000 Adjustments to convert net income to cash basis Depreciation expenses    48000 Gain on sale of equipment -6000 Decrease in Accounts receivable 11000 Increase in Inventories -2000 Increase in Accounts Payable 5000 Decraese in Interest payable    (1,000) 55000 Net cash from operating activities      129,000.00 Cash flows from investing activities Purchase of Equipment 333000-(300000-50000) -83000 Purchase of land -10000 Sale of Equipment 20000 -73000 Net cash used investing activities      (73,000.00) Cash flows from financing activities Repayment of Notes payable -20000 Issue of Common stock 25000 Payment of Dividends 147000-(123000+74000) -50000       (45,000.00) Net cash from financing activities      (45,000.00) Net Increase in cash and cash equivalents      11,000.00 Cash and cash equivalents at beginning of period      52,000.00 Ending Balance           63,000.00

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