(SCF—Indirect Method) Condensed financial data of Fairchild Company for 2012 and

Question

(SCF—Indirect Method) Condensed financial data of Fairchild Company for 2012 and 2011 are presented below. Prepare the statement of cash flow using the indirect method. FAIRCHILD COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2012 AND 2011. 2012 2011 Cash $1,800 $1,100 Receivables 1,750 1,300 Inventory 1,600 1,900 Plant assets 1,900 1,700 Accumulated depreciation (1,200) (1,170) Long-term investments (held-to-maturity) 1,300 1,470 = =$7,150 =$6,300 Accounts payable $1,200 $ 800 Accrued liabilities 200 250 Bonds payable 1,400 1,650 Common stock 1,900 1,700 Retained earnings 2,450 1,900 =$7,150 =$6,300 FAIRCHILD COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012 Sales , $6,900 Cost of goods sold 4,700 Gross margin 2,200 Selling and administrative expenses 930 Income from operations 1,270 Other revenues and gains Gain on sale of investments 80 Income before tax 1,350 Income tax expense 540 Net income =$ 810 Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2012. Cash dividends were $260. Instructions Prepare a statement of cash flows using the indirect method. (show the necessary workings to get the figures)

Explanation / Answer

cash from operating activities net income for the year 810 Adjustments to reconcile net income depreciation expense 30 gain on sale of investment -80 increase in receivable -450 decrease in inventory 300 increase in accounts payable 400 Decrease in accrued liabilities -50 cash from operating activities 960 960 Cash from investing activities cash from sale of investments 250 purchase of plant assets -130 Cash from investing activities 120 cash from financing activity redemption of bonds payable -250 cash from common stock issue 130 cash dividend paid -260 cash used by financing activity -380 -380 net increase in cash 700 cash at the beginning of the year 1,100 Cash at year end 1800

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