The comparative balance sheet of Posner Company, for 2010 and the preceding year
ID: 2443936 • Letter: T
Question
The comparative balance sheet of Posner Company, for 2010 and the preceding year ended December 31, 2009, appears below in condensed form:
Year Year
2010 2009
Cash $ 53,000 $ 50,000
Accounts receivable (net) 37,000 48,000
Inventories 108,500 100,000
Investments ..... 70,000
Equipment 573,200 450,000
Accumulated depreciation-equipment (142,000) (176,000)
$629,700 $542,000
Accounts payable $ 62,500 $ 43,800
Bonds payable, due 2010 ..... 100,000
Common stock, $10 par 325,000 285,000
Paid-in capital in excess of par--
common stock 80,000 55,000
Retained earnings 162,200 58,200
$629,700 $542,000
The income statement for the current year is as follows:
Sales $625,700
Cost of merchandise sold 340,000
Gross profit $285,700
Operating expenses:
Depreciation expense $26,000
Other operating expenses 68,000 94,000
Income from operations $191,700
Other income:
Gain on sale of investment $ 4,000
Other expense:
Interest expense 6,000 (2,000)
Income before income tax $189,700
Income tax 60,700
Net income $129,000
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200.
(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.
Prepare a statement of cash flows, using the indirect method of reporting cash flows from Operating, Finance and Investing activities
Explanation / Answer
Cash flow from operating activities(indirect method) Net income $129,000 Depreciation provided $26,000 Decrease in accounts receivable $11,000 Dividends declared $25,000 Increase in inventories ($8,500) increase in accounts payable $18,700 cash flow from operating activities(indirect method) $201,200