comparative balance sheet of Posner Company, appears below in condensed form: fo

Question

comparative balance sheet of Posner Company, appears below in condensed form: for 2010 and the preceding year ended December 31, 2009, Year 2010 Year 2002 Cash S 53,000 50,000 Accounts receivable (net) 48,000 100,000 0,000 450,000 37,000 108,500 Investments Equipment Accumulated depreciation-equipment 573,200 1142.000) 76.000) $629.700 542,000 Accounts payable 62,500 43,800 Bonds payable, due 2010 100,000 285,000 55,000 629,700 $542,000 Common stock, $10 par 335,000 Paid-in capital in excess of par- 70,000 58,209 162.200 common stock Retained eamings The income statement for the current year is as follows: Sales Cost of merchandise sold Gross profit Operating expenses: $625,700 340.000 $285,700 $26,000 68,000 94,000 Depreciation expense Other operating expenses Income from operations Other income: $191,700 $ 4,000 Gain on sale of investment Other expense: 6,000(2,000) $189,700 60.700 129.000 Interest expense Income before income tax Income tax Net income Additional data for the current year are as follows: Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200. (a) (b) Bonds payable for $100,000 were retired by payment at their face amount (c) 5,000 shares of common stock were issued at $13 for cash. (d) Cash dividends declared and paid, $25,000. 1. Prepare a statement of cash Rows, using the indirect method of reporting cash fNlows from operating activities

Explanation / Answer

Cash flow indirect method Cash flow from operating activities Net income 129000 Adjustments to reconcile the net income Gain on sale of Investment -4000 Depreciation expense 26000 Decrease in accounts receivable 11000 Increase in Inventory -8500 Increase in accounts payable 18700 43200 Cash flow from operating activities 172200 Cash flow from Investing activities Equipment purchased -183200 Investment sold 74000 Cash flow from Investing activities -109200 Cash flow from Financing activities Common stock 50000 Bonds payable retired -100000 Paid in capital in excess 15000 Dividends -25000 Cash flow from Financing activities -60000 Net Cash and cash equivalent 3000 Add Beginning cash and cash equivalent 50000 Ending cash and cash equivalent 53000

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