Dividends in the amount of $6,000 were declared and paid during 2012. Depreciati
ID: 2468598 • Letter: D
Question
Dividends in the amount of $6,000 were declared and paid during 2012. Depreciation expense and amortization expense are included in operating expenses. No unrealized gains or losses have occurred on the investments during the year. Equipment that had a cost of $30,000 and was 70% depreciated was sold during 2012. Prepare a statement of cash flows using the INDIRECT method. (Do not prepare a reconciliation schedule.) Data for Andrews Inc. are presented in E23-13. Prepare a statement of cash flows using the indirect method. Presented below are data taken from the records of Morganstern Company. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2011, were sold in 2012 for $34,000. The loss (not extraordinary) was incorrectly charged directly to Retained Earnings. Plant assets that cost $60,000 and were 80% depreciated were sold during 2012 for $8,000. The loss (not extraordinary) was incorrectly charged directly to Retained Earnings: Net income as reported on the income statement for the year was $59,000. Dividends paid amounted to $10,000. Depreciation charged for the year was $28,000. Prepare a statement of cash flows for the year 2012 using the indirect method. The balance sheet data of Wyeth Company at the end of 2012 and 2011 are shown on page 1488.Explanation / Answer
First question:
6)
Note: as the loss on sale of asset and sale of securities held to maturity were directly charged to the retained earnings account, the cash flow from operating and investing activites will not be affected by such losses.
Cash flow statement:
Net Income $ 27,000.00 Adjustment to reconcile net income with operating cash flows Add: depreciation (70% of $30000) $ 21,000.00 Less: Gain on sale of equipment $ -2,000.00 Cash flow from operating activites $ 46,000.00 Cash flow from investing activites Sale of assets (30000 - 70% x 30000 + 2000) $ 11,000.00 Cash flow from Financing Activites $ -6,000.00 Cash provided by the business $ 51,000.00