Problem 12-7A (Part Level Submission) Presented below are the financial statemen

Question

Problem 12-7A (Part Level Submission) Presented below are the financial statements of Kurtzel Company. KURTZEL COMPANY Comparative Balance Sheets December 31 201 Cash Accounts receivable Inventory Property, plant, and equipment 2014 35,000 20,000 28,000 60,000 20,000 14,000 20,000 78,000 (32,000) (24,000) Total $111,000 $108,000 and Accounts payable Income taxes payable Bonds payable Common stock Retained eanings Total $ 19,000 7,000 17,000 18,000 50,000 $111,000 15,000 8,000 33,000 14,000 38,000 $108,000 Sales revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net incom $242,000 175,000 67,000 $18,000 24,000 43,000 3,000 40,000 8,000 32,000 Additional data: 1. Depreciation expense was 17,500. 2. Dividends declared and paid were $20,000 3. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had accumulated depreciation of $9,500 at the time of sale. (a) Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash now with either a . sign e.g. -15,000 or in parenthesis e.g. (15,000).) Statement ef Cash Flows For the Year Ended December 31, 2014 Adjustments to reconcile net income to

Explanation / Answer

KURTZEL COMPANY Cash Flow Statement (Indirect Method) For the year ended December 31 2014 Particulars Amount $ Cash Flow from Operating Activities Net Income 32000 Adjustments Add: Depreciation & Amortisation 17500 Increasing in Inventory -8000 Increase in Accounts Receivable -6000 Increase in Accounts Payable 4000 Decrease in Income tax payable -1000 Decrease in Bonds payable -16000 Total Cash Flow from Operating Activities 22500 Cash flows from investing activities Proceeds from sale of Equipment 8,500 Net cash used in investing activities 8,500 Cash flows from financing activities Cash received from sale of common stock 4000 Cash dividend paid -20,000 Net cash used in financing activities -16,000 Net increase in cash and cash equivalents 15,000 Cash and cash equivalents at beginning of period 20,000 Cash and cash equivalents at end of period $35,000

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