On the basis of the following data for Teller Co. for 2008 and the preceding yea

Question

On the basis of the following data for Teller Co. for 2008 and the preceding year ended December 31, 2008, 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 $51,000 and cash dividends declared of $13,000.


Year

Year

2008 2007
Cash
$100,000 $ 78,000
Accounts receivable (net)
78,000 85,000
Inventories
101,500 90,000
Equipment
410,000 370,000
Accumulated depreciation
(150,000) (158,000)

$539,500 $465,000

Accounts payable (merchandise creditors)
$ 58,500 $ 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

$539,500 $465,000

Explanation / Answer

           Statement of Cash Flow (Indirect Method)
            For the year Ended December 31, 2008

Net Income                                                $51,000
Adjustments to reconcile net income
to net cash provided
Add: Depreciation                                       $57,000
                                                               $108,000
Changes in other accounts
affecting operation
Decrease in receivables          +$7,000
Increase in Accounts Payabl.   +$3,500
Increase in Inventories         -$11,500         -1,000
Loss on sale of equipments                           5,000
                                                             _________
Net cash provided by
operating activities                             $112,000

Cash flow from Investing Activities
Equipments purchased     ($125,000)
Proceeds from Sale
of Equipment                     $15,000         
Net Cash Provided by                                                   
Investing Activities                          ($110,000)
                                                            $2,000
Cash flow from Financing Activities
Proceeds from Issuance
of Common Stock               $32,000
Dividends                        ($12,000)
Net Cash provided by                          
Financing activities                            $20,000
Increase / (Decrease) in Cash             $22,000
Beginning Cash Balance                        $78,000
Ending Cash Balance                      $100,000
                                 


  

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