Prepare a statement of cash flows using the indirect method. Additional informat
ID: 2482778 • Letter: P
Question
Prepare a statement of cash flows using the indirect method.
Additional information:
Dividends declared and paid were $4,000.
During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
All depreciation expense is in the selling expense category. Depreciation expense amounted to $7,500.
All sales and purchases are on account.
1. The financial statements of ABC Co. appear below ABC Co Comparative Balance Sheet December 31 2014 Assets Cash Accounts receivable Merchandise inventor Property, plant and equipment Accumulated depreciation 2015 $ 31,000 28,000 25,000 60,000 $ 13,000 14,000 35,000 78,000 Total $122,000 Liabilities and Stockholders Equit Accounts payable Income taxes payable Bonds pavable Common stock Retained earnin $ 27,000 5,000 27,000 18,000 45,000 $122,000 $ 23,000 8,000 35,000 14,000 Total ABC Co Income Statement For the Year Ended Dec 31, 2015 Sales Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $220,000 180.000 40,000 $14,000 22,000 18,000 17,000 Additional information: a. Dividends declared and paid were $4,000 b. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale c. All depreciation expense is in the selling expense category. Depreciation expense amounted to $7,500 d. All sales and purchases are on account.Explanation / Answer
Cash Flow Statement ( Indirect Method) Amount ($) Amount ($) A Cash Flow from Operating Activities Net income 13000 Adjustments For : Depreciation Expenses 7500 Increase Account Receiavables -14000 Decrease in Merchandise Incentory 10000 Increae Account Payable 4000 Decreae Income Tax Payables -3000 Total 4500 Net Cash Flow From Operating Activities 17500 B Cash Flow from Investing Activities Sale of Equipment 8500 Net Cash used for investing Activities 8500 C Cash Flow from Financing Activities Payment of Dividend -4000 Issue of Common stock 4000 Decrease Bonds Payable -8000 Net Cash used for Financing Activities -8000 Net Increaes in Cash (A+B+C) 18000 Cash at begning of Period 13000 Cash at the end of period 31000