ABC Corporation’s comparative balance sheets are presented below 2012 2011 Asset

ID: 2488563 • Letter: A

Question

ABC Corporation’s comparative balance sheets are presented below 2012 2011 Assets Cash 28,200 17,700 Accounts Receivable 24,200 22,300 Investments 23,000 16,000 Equipment 60,000 70,000 Accumulated Depreciation–Equip (14,000) (10,000) Total Assets 121,400 116,000 Liabilities and Owners’ Equity Accounts Payable 19,600 11,100 Bonds Payable 10,000 30,000 Common Stock 60,000 45,000 Retained Earnings 31,800 29,900 Total Liabilities and Owners’ Equity 121,400 116,000 Additional information: 1. Net income was $28,300. Dividends declared and paid were $26,400. 2. Equipment which cost $10,000 and had accumulated depreciation of $1,200 was sold for $4,300 3. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. Instructions Prepare a statement of cash flows for 2012 using the indirect method. (SHOW ALL WORK)

Explanation / Answer

Statement of cash flows for 2012

(Using the indirect method)

Cash Flows from Operating Activities:

Net Income

$ 28,300

Add: Depreciation (14000-10000)

$ 4,000

Add: Loss on sale of Equipment (70000-60000)-4300 =

$ 5,700

Less: Increase in Accounts Receivable (24200-22300)

$ (1,900)

Add: Increase in Accounts Payable (19600 -11100)

$ 8,500

Net cash provided by Operating Activities

$ 44,600

Cash Flows from Investing Activities:

Investments made (23000-16000)

$ (7,000)

Equipment sold

$ 4,300

Net cash used in Investing Activities

$ (2,700)

Cash Flows from Financing Activities:

Redemption of Bonds Payable (30000-10000)

$ (20,000)

Common Stock Issued (60000-45000)

$ 15,000

Dividend Paid

$ (26,400)

Net cash used in Financing Activities

$ (31,400)

Net cash flows

$ 10,500

Add: Beginning Cash Balance

$ 17,700

Ending Cash Balance

$ 28,200