CP12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-3,
ID: 2591398 • Letter: C
Question
CP12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-3, LO 12-4, LO 12-5]
Hunter Company is developing its annual financial statements at December 31, 2015. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
2015 2014
Balance Sheet at December 31
Cash $ 51,740 $ 21,000
Accounts Receivable 32,400 35,000
Inventory 35,400 42,000
Equipment 117,600 108,000
Accumulated Depreciation—Equipment (39,600 ) (33,000 )
$ 197,540 $ 173,000
Accounts Payable $ 28,600 $ 25,000
Salaries and Wages Payable 740 1,000
Note Payable (long-term) 44,000 54,000
Common Stock 89,000 66,000
Retained Earnings 35,200 27,000
$ 197,540 $ 173,000
Income Statement for 2015
Sales Revenue $ 106,000
Cost of Goods Sold 64,000
Other Expenses 29,400
Net Income $ 12,600
Additional Data:
a. Bought equipment for cash, $9,600.
b. Paid $10,000 on the long-term note payable.
c. Issued new shares of stock for $23,000 cash.
d. Declared and paid a $4,400 cash dividend.
e.
Other expenses included depreciation, $6,600; salaries and wages, $10,600; taxes, $3,600; utilities, $8,600.
f.
Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.
Required:
1.
Prepare the statement of cash flows for the year ended December 31, 2015, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Explanation / Answer
Statement of Cash flows for the year ended December 31, 2015
Cash flow from operating activities Net income $12,600 Depreciation $6,600 Accounts receivables $2,600 Inventory $6,600 Accounts payables $3,600 Salaries and wages payable -$260 Cash flow from operating activities $31,740 Cash flow from investing activities Purchase of equipment -$9,600 Cash used in investing activities -$9,600 Cash flow from financing activities paid long term notes payable -$10,000 issue of stock $23,000 dividends paid -$4,400 Cash flow from financing activities $8,600 Net increase in cash $30,740 Beginning cash balance $21,000 Ending cash balance $51,740