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The following information relates to Dunwoody Nursery & Garden Center, Inc. The

ID: 2436337 • Letter: T

Question

The following information relates to Dunwoody Nursery & Garden Center, Inc. The company leases a building adjacent to its land.

Dunwoody Nursery & Garden Center, Inc.

Comparative Balance Sheets

2011 December 31 and 2010

Net income was $ 97,500 for the year.

Fully depreciated equipment costing $ 15,000 was sold for $ 3,750 (a gain of $ 3,750), and equipment costing $ 112,500 was purchased for cash.

Depreciation expense for the year was $ 30,000.

Land was purchased, $ 60,000.

An additional 7,500 shares of common stock were issued for cash at $ 20 per share (total proceeds, $ 150,000).

Cash dividends of $ 60,000 were declared and paid.

Prepare a statement of cash flows under the indirect method.

2011 2010 Assets Cash $44,500 $ 52,000 Accounts receivable, net 59,000 60,000 Merchandise inventory 175,000 120,000 Equipment 412,500 315,000 Accumulated depreciation – equipment (120,000) (105,000) Land 75,000 15,000 Total assets $646,000 $457,000 Liabilities and stockholders’ equity Accounts payable $ 43,750 $40,750 Accrued liabilities payable 2,250 3,750 Capital stock – common – $10 par 375,000 300,000 Paid-in capital in excess of par 150,000 75,000 Retained earnings 75,000 37,500 Total liabilities and stockholders’ equity $646,000 $457,000

Explanation / Answer

Answers

2011

2010

Increase (Decrease) in 2011

Assets

Cash

$                     44,500.00

$                             52,000.00

$               (7,500.00)

Accounts receivable, net

$                     59,000.00

$                             60,000.00

$               (1,000.00)

Merchandise inventory

$                   175,000.00

$                           120,000.00

$               55,000.00

Equipment

$                   412,500.00

$                           315,000.00

$               97,500.00

Accumulated depreciation – equipment

$                 (120,000.00)

$                        (105,000.00)

$             (15,000.00)

Land

$                     75,000.00

$                             15,000.00

$               60,000.00

Total assets

$                   646,000.00

$                           457,000.00

$             189,000.00

Liabilities and stockholders’ equity

$                              -  

Accounts payable

$                     43,750.00

$                             40,750.00

$                 3,000.00

Accrued liabilities payable

$                        2,250.00

$                               3,750.00

$               (1,500.00)

Capital stock – common – $10 par

$                   375,000.00

$                           300,000.00

$               75,000.00

Paid-in capital in excess of par

$                   150,000.00

$                             75,000.00

$               75,000.00

Retained earnings

$                     75,000.00

$                             37,500.00

$               37,500.00

Total liabilities and stockholders’ equity

$                   646,000.00

$                           457,000.00

$             189,000.00

Cash Flows from Operating Activities

Net Income

$                                                97,500.00

Adjustments to reconcile Net Income

Depreciation expense

$                   30,000.00

Decrease in Accounts receivables

$                     1,000.00

Increase in inventories

$                (55,000.00)

Gain on sale of Investments

$                   (3,750.00)

Increase in Accounts payable

$                     3,000.00

Decrease in Accrued Liabilities

$                   (1,500.00)

$                                               (26,250.00)

Net Cash flow from Operating activities

$                                                 71,250.00

Cash Flows from Investing Activities

Sale of Equipment

$                     3,750.00

Purchase of Equipment

$              (112,500.00)

Purchase of Land

$                (60,000.00)

Net Cash flow from Investing activities

$                                             (168,750.00)

Cash flows from Financing activities

Issue of Common Stock

$                150,000.00

Dividends paid

$                (60,000.00)

Net Cash flows from Financing activities

$                                                 90,000.00

Increase (Decrease) in Cash

$                                                 (7,500.00)

Cash at Beginning

$                                                 52,000.00

Cash at the end

$                                                 44,500.00

2011

2010

Increase (Decrease) in 2011

Assets

Cash

$                     44,500.00

$                             52,000.00

$               (7,500.00)

Accounts receivable, net

$                     59,000.00

$                             60,000.00

$               (1,000.00)

Merchandise inventory

$                   175,000.00

$                           120,000.00

$               55,000.00

Equipment

$                   412,500.00

$                           315,000.00

$               97,500.00

Accumulated depreciation – equipment

$                 (120,000.00)

$                        (105,000.00)

$             (15,000.00)

Land

$                     75,000.00

$                             15,000.00

$               60,000.00

Total assets

$                   646,000.00

$                           457,000.00

$             189,000.00

Liabilities and stockholders’ equity

$                              -  

Accounts payable

$                     43,750.00

$                             40,750.00

$                 3,000.00

Accrued liabilities payable

$                        2,250.00

$                               3,750.00

$               (1,500.00)

Capital stock – common – $10 par

$                   375,000.00

$                           300,000.00

$               75,000.00

Paid-in capital in excess of par

$                   150,000.00

$                             75,000.00

$               75,000.00

Retained earnings

$                     75,000.00

$                             37,500.00

$               37,500.00

Total liabilities and stockholders’ equity

$                   646,000.00

$                           457,000.00

$             189,000.00