Show all calculations for answers. 1. On the basis of the following data for Lar
ID: 2582640 • Letter: S
Question
Show all calculations for answers.
1. On the basis of the following data for Larson Co. for the year ending December 31 Year 2, and the preceding year ended December 31 Year 1, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that:
Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000. (16-151)
Year 2
Year 1
Cash
$100,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
101,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000
$539,500
$465,000
Accounts payable (merchandise creditors)
$ 58,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paidin capital in excess of par—common stock
62,000
60,000
Retained earnings
214,000
176,000
$539,500
$465,000
Year 2
Year 1
Cash
$100,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
101,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000
$539,500
$465,000
Accounts payable (merchandise creditors)
$ 58,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paidin capital in excess of par—common stock
62,000
60,000
Retained earnings
214,000
176,000
$539,500
$465,000
Explanation / Answer
prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities.
Cash flow from operating activities Net income 51000 Adjustment to reconcile net income Depreciation 57000 decrease account receivable 7000 Increase inventory (11500) Increase account payable 3500 Increase cash dividend payable 1000 Loss on sale of equipment 5000 Net cash flow from operating activities 113000 Cash flow from investing activities Purchase equipment (125000) Sale of equipment 15000 Net Cash flow from investing activities (110000) Cash flow from financing activities Issue common stock 32000 Dividend paid (13000) Net Cash flow from financing activities 19000 Net cash flow 22000 Beginning cash 78000 Ending cash 100000