Ending equipment balance Purchased with cash formula Amount The comparative bala
ID: 2427155 • Letter: E
Question
Ending equipment balance
Purchased with cash formula
Amount
The comparative balance sheets for Hinckley Corporation show the following information: December 31 2012 2011 Cash $33,500 $13,000 Accounts receivable 12,250 10,000 Inventory 12,000 9,000 Investments 0 3,000 Building 0 29,750 Equipment 45,000 20,000 Patent 5,000 6,250 Totals $107,750 $91,000 Allowance for doubtful accounts $3,000 $4,500 Accumulated depreciation on equipment 2,000 4,500 Accumulated depreciation on building 0 6,000 Accounts payable 5,000 3,000 Dividends payable 0 5,000 Notes payable, short-term (nontrade) 3,000 4,000 Long-term notes payable 31,000 25,000 Common stock 43,000 33,000 Retained earnings 20,750 6,000 Totals $107,750 $91,000 Additional data related to 2012 are as follows: 1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500 2. $10,000 of the long-term note payable was paid by issuing common stock. 3. Cash dividends paid were $5,000 4. On January 1, 2012, the building was completely destroyed by a flood. Insurance proceeds on the building were $30,000 (net of $2,000 taxes). 5. Investments (available-for-sale) were sold at $1,700 above their cost. The company has made similar sales and investments in the past. 6. Cash of was paid for the acquisition of equipment. 7. A long-term note for $16,000 was issued for the acquisition of equipment. 8. Interest of $2,000 and income taxes of $6,500 were paid in cash. Instructions: Prepare a statement of cash flows using the indirect method.Flood damage is unusual and infrequent in that part of the country. HINCKLEY CORPORATION Statement of Cash Flows For the Year Ended December 31, 2012 Cash flows from operating activities Net income (a) $14,750 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of equipment (b) $5,200 Gain from flood damage Amount Depreciation expense (c) Amount Patent amortization Amount Gain on sale of investments (3,700) Increase in accounts receivable (net) Amount Increase in inventory (3,000) Increase in accounts payable Amount Formula Net cash provided by operating activities Formula Cash flows from investing activities Sale of investments $6,700 Sale of equipment Amount Purchase of equipment (d) Amount Proceeds from flood damage to building Amount Net cash provided by investing activities Formula Cash flows from financing activities Payment of dividends ($5,000) Payment of short-term note payable Amount Net cash used by financing activities Formula Increase in cash Amount Cash, January 1, 2012 Amount Cash, December 31, 2012 Formula Supplemental disclosures of cash flow information: Cash paid during the year for: Interest 2,000 Income taxes: Amount Noncash investing and financing activities Retired note payable by issuing common stock Amount Purchased equipment by issuing note payable Amount Formula Supporting Computations: (a) Ending retained earnings Amount Beginning retained earnings Amount Net income Formula (b) Cost Amount Accumulated depreciation Amount Book value Formula Proceeds from sale Amount Loss on sale Formula (c) Accumulated depreciation on equipment sold Amount Decrease in accumulated depreciation Amount Depreciation expense Formula (d) Beginning equipment balance $20,000 Cost of equipment sold Amount Remaining balance Formula Purchase of equipment with note Amount Adjusted balance Formula
Ending equipment balance
Purchased with cash formula
Amount
Explanation / Answer
Increase in accoun
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