Preparing the statement of cash flows---indirect method The income statement of
ID: 2467429 • Letter: P
Question
Preparing the statement of cash flows---indirect method
The income statement of Minerals Plus, Inc. Follows:
Sales revenue
$235,000
Cost of goods sold
97,000
Gross profit
138,000
Operating expense
Salaries expense
$57,000
Depreciation expense—plant asset
26,000
Total operating expense
83,000
Net income before income taxes
55,000
Income tax expense
4,000
Net income
$51,000
Additional data follow:
Acquisition of plant asset is $119,000. Of this amount, $100,000 is paid in cash and $19,000 by signing a note payable.
Cash receipt from sale of land total $28,000. There was no gain or loss.
Cash receipt from issuance of common stock total $29,000
Payment of note payable is $18,000
Payment of dividends is $8,000
From the balance sheet.
September 30
Cash
Accounts receivable
Merchandise inventory
Plant assets
Accumulated depreciation
Land
Accounts payable
Accrued liabilities
Notes payable (long-term)
Common stock
Retained earnings
Prepare Minerals Plus’s statement of cash flow for the year ended in September 30, 2015, using the indirect method. Include a separate section for non-cash investing and financing activities.
Sales revenue
$235,000
Cost of goods sold
97,000
Gross profit
138,000
Operating expense
Salaries expense
$57,000
Depreciation expense—plant asset
26,000
Total operating expense
83,000
Net income before income taxes
55,000
Income tax expense
4,000
Net income
$51,000
Explanation / Answer
Net income before tax
55000
Add
Depreciation (non cash exp)
-26000
110000
Less
Income tax expenses
-4000
Cashflow from operating activity
106000
Aquisation of plant assets
-100000
Cash receipt from sale of land
28000
Payment of note payable (assume its w.r.t. plant acquired)
-18000
Cashflow from investment activity
-90000
Cash receipt from issuance of common stock
29000
Payment of divident
-8000
Cashflow from financial activity
21000
Net cash flow
37000
Non cash
Operating
Depreciation 26000
Investment
Acquisation of plant 119000-100000-18000=1000
Net income before tax
55000
Add
Depreciation (non cash exp)
-26000
110000
Less
Income tax expenses
-4000
Cashflow from operating activity
106000
Aquisation of plant assets
-100000
Cash receipt from sale of land
28000
Payment of note payable (assume its w.r.t. plant acquired)
-18000
Cashflow from investment activity
-90000
Cash receipt from issuance of common stock
29000
Payment of divident
-8000
Cashflow from financial activity
21000
Net cash flow
37000