On the basis of the following data for Grant Co. for 2011 and the preceding year
ID: 2381554 • Letter: O
Question
On the basis of the following data for Grant Co. for 2011 and the preceding year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $56,000 and cash dividends declared of $18,000.
Year
Year
2011
2010
Cash
$90,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
$534,500
$465,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par--
common stock
62,000
60,000
Retained earnings
214,000
176,000
$534,500
$465,000
Year
Year
2011
2010
Cash
$90,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
$534,500
$465,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par--
common stock
62,000
60,000
Retained earnings
214,000
176,000
$534,500
$465,000
Explanation / Answer
Please find below the statement of cashflows:
A couple of clarifications:
Depreciation = increase in accumulated depreciation + 65,000 (as the sold equipment had accumulated depreciation of 65,000)
Loss from sale of equipment = book value - realized value = 20,000-15,000 = 5,000
Cash dividends paid = cash dividends declared - increase in dividends payable
Hope this helped ! Let me know in case of any queries.
Operating cashflows Net income 56,000 Depreciation 57,000 Loss from sale of equipment 5,000 Decrease in accounts receivable 7,000 Increase in inventories -16,500 Decrease in accounts payable -1,500 Total cash from operating activities 107,000 Investing cashflows Purchase of equipment -125,000 Sale of equipment 15,000 Total cash from investing activities -110,000 Financing cashflows Issue of common equity 32,000 Cash dividends paid -17,000 Total cash from financing activities 15,000 Total cash generated 12,000 Beginning cash 78,000 Ending cash 90,000Related Questions
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