The following information is available for Mehring Corporation for the year ende
ID: 2381557 • Letter: T
Question
The following information is available for Mehring Corporation for the year ended December 31, 2012:
Collection of principal on long-term loan to a supplier $35,000
Acquisition of equipment for cash 10,000
Proceeds from the sale of long-term investment at book value 22,000
Issuance of common stock for cash 20,000
Depreciation expense 25,000
Redemption of bonds payable at carrying (book) value 34,000
Payment of cash dividends 14,000
Net income 30,000
Purchase of land by issuing bonds payable 40,000
In addition, the following information is available from the comparative balance sheet for Mehring at the end of 2012 and 2011:
2012 2011
Cash $102,000 $34,000
Accounts receivable (net) 25,000 15,000
Prepaid insurance 19,000 13,000
Total current assets $146,000 $62,000
Accounts payable $30,000 $19,000
Salaries payable 6,000 7,000
Total current liabilities $36,000 $26,000
Instructions
Prepare Mehring's statement of cash flows for the year ended December 31, 2012, using the indirect method.
Explanation / Answer
Indirect Method PARTICULARS AMOUNT AMOUNT Operating Activities Net Income 30000 Add : Depreciation for the year 25000 Changes in Assets and liabilities Less : Increase in A/c receivable (25000 - 15000) $10,000 Less: Increase in Prepaid Insurance(19000 - 13000) $6,000 Less : Decrease in Salary payable (7000-6000) $1,000 Add: Increase in Accounts payables (30000 - 19000) $11,000 Cash from operating activities $49,000 Investment Activities Sales of Longterm Investments $22,000 Less :Purchase of Equipment $10,000 $12,000 Cash from Investment Activities Finance Activities Collection of long term loan 35000 Common stock issue $20,000 Less :Redemption of Bonds ($34,000) Less: Cash dividends paid ($14,000) Cash from Finance Activities $7,000 Total cash from all the activities $68,000 Add: Opening Cash Balance $34,000 Closing cash balance (Balance figure) $102,000
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