Preparing a statement of cash flows for the following data below. Here is the in

Question

Preparing a statement of cash flows for the following data below.

Here is the information:

Presented below are the comparative balance sheets for Gordon Company at December 31, 2013, and 2012.

Additional Information:

1. Land was sold for $28,000 cash. Land was also obtained through issuance of common stock (see item 2). These are the only two transactions impacting land.

2. Land was obtained by issuing 25,000 shares of $1 par value common stock. The land had a fair value of $36,000.

3. Cash dividends of $86,500 were paid.

4. Net income for 2013 was $100,000.

5. Equipment was purchased for cash. In addition, equipment costing $32,000 with a book value of $12,000 was sold for $9,000 cash.

GORDON COMPANY
Comparative Balance Sheet
December 31 2013 2012 Cash $ 113,500 $ 43,000 Accounts Receivable 63,000 56,000 Inventory 102,000 107,000 Prepaid Insurance 12,000 18,000 Land 136,000 120,000 Equipment 172,000 142,000 Accumulated Depreciation—Equipment (46,000) (33,000) Building 200,000 200,000 Accumulated Depreciation—Building (60,000) (39,000) $ 692,500 $ 614,400 Accounts Payable $33,000 $29,000 Bonds Payable 210,000 185,000 Common Stock, $1 Par 145,000 120,000 Paid-in Capital in Excess of Par 90,000 79,000 Retained Earnings 214,500 201,000 $ 692,500 $ 614,000

Explanation / Answer

SOLUTION :

CASH FLOW STATEMENT $ OPERATING ACTIVITIES NET INCOME                          100,000 LOSS ON SALE OF LAND (36000-28000)                               8,000 LOSS ON SALE OF EQUIPMENT (12000-9000)                               3,000 DEPRECIATION -EQUIPMENT (46000-33000)                             13,000 DEPRECIATION BLDG (60000-39000)                             21,000 INCREASE IN ACCOUNT RECEIVABLE -                            7,000 DECREASE IN INVENTORY -                            5,000 DECREASE IN PREPAID INSURANCE -                            6,000 INCREASE IN ACCOUNT PAYABLE                               4,000 NET CASH FLOW FROM OPERATING ACTIVITIES                          131,000 INVESTING ACTIVITIES PURCHASE OF LAND -                          36,000 SALE OF LAND                             28,000 SALE OF EQUIPMENT                               9,000 NET CASH FLOW FROM INVESTING ACTIVITIES                               1,000 FINANCING ACTIVITIES CASH DIVIDEND -                          86,500 BONDS (210000-185000)                             25,000 NET CASH FLOW FROM OPERATING ACTIVITIES -                          61,500 NET CASH GENERATED                             70,500 ADD : OPENING CASH BALANCE                             43,000 CLOSING CASH BALANCE                          113,500

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