Harlan Mining Co. has recently decided to go public and has hired you as an inde

Question

Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below.

$1,080,000

$1,158,000

$1,080,000

$1,158,000

$ 216,000

The following additional data were provided:

Questions relate to a statement of cash flows (indirect method) for the year ended December 31, 2015, for Harlan Mining Company.

The net cash provided by operating activities is

BALANCE SHEETS 12/31/15 12/31/14 Cash $306,000 $ 144,000 Accounts receivable 270,000 162,000 Inventory 288,000 360,000 Property, plant and equipment $456,000 $720,000 Less accumulated depreciation (240,000 ) 216,000 (228,000 ) 492,000

$1,080,000

$1,158,000

. Accounts payable $ 132,000 $ 72,000 Income taxes payable 264,000 294,000 Bonds payable 270,000 450,000 Common stock 162,000 162,000 Retained earnings 252,000 180,000

$1,080,000

$1,158,000

Explanation / Answer

Working notes:

(1) Loss on sale of equipment = Book value - Sale price = $(216,000 - 180,000) = $36,000

(2) Depreciation in 2015 = Accumulated depreciation in 2015 - Accumulated depreciation in 2014

= $(240,000 - 228,000) = $12,000

CASH FLOW FROM OPERATING ACTIVITIES $ Net Income 2,16,000 Add: Loss from sale of equipment 36,000 Add: Depreciation 12,000 Add: Increase in Current Liabilities       Accounts Payable 60,000 Add: Decrease in Current Assets      Inventory 72,000 Less: Increase in Current Assets      Accounts Receivable -1,08,000 Less: Decrease in Current Liabilities     Income tax payable -30,000 NET CASH FLOW FROM OPERATING ACTIVITIES 2,58,000

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