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ROCKER COMPANY Comparative Balance Sheet Dec. 31, 2012 Dec. 31, 2011 Assets Cash

ID: 2500174 • Letter: R

Question

ROCKER COMPANY

Comparative Balance Sheet

                                                                                                                                                Dec. 31, 2012                            Dec. 31, 2011

Assets

Cash                                                                                                                                                $ 33,000                                      $10,000

Accounts receivable                                                                                                                       18,000                                         14,000

Inventory                                                                                                                                            25,000                                         18,000

Prepaid expenses                                                                                                                              6,000                                           9,000

Long-term investments                                                                                                                    -0-                                             18,000

Equipment                                                                                                                                        60,000                                         32,000

Accumulated depreciation—equipment                                                                              (20,000)                                      (14,000)

              Total assets                                                                                                                    $122,000                                      $87,000

Liabilities and Stockholders' Equity

Accounts payable                                                                                                                       $ 17,000                                       $ 7,000

Bonds payable                                                                                                                                 37,000                                         47,000

Common stock                                                                                                                                40,000                                         23,000

Retained earnings                                                                                                                          28,000                                       10,000

              Total liabilities and stockholders' equity                                                               $122,000                                      $87,000

Additional information:

1.      Net income for the year ending December 31, 2012 was $33,000.

2.      Cash dividends of $15,000 were declared and paid during the year.

3.      Long-term investments that had a cost of $18,000 were sold for $14,000.

4.      Sales for 2012 were $120,000.

Instructions

Prepare a statement of cash flows for the year ended December 31, 2012, using the indirect method. (20 Points)   

Explanation / Answer

Rocker Company Cash Flow Statement For the Year ended Dec 31, 2012 Amount($) Cash Flow from Operating activities: Net Income 33000 Add: Loss on sale of Long term Investment 4000 Add: Depreciation on Equipment 6000 Adjustment of Working Capital: Increase in Accounts Receivable                    -4,000 Increase in Inventory -7,000 Decrease in Prepaid Expense 3,000 Cash Flow from Opearating Activities A 45,000 Cash Flow from Investing Activities: Sale of Long term Investment                   14,000 Purchase of Equipment -28,000 Cash Flow from Investing Activities B -14,000 Cash Flow from Financing Activities: Redemption of Bonds                  -10,000 Issue of Common Stock 17000 Cash Dividend -15,000 Cash flow from Financing Activities C -8,000 Net Cash flow for the year D=A+B+C 23,000 Opening Cash E 10,000 Closing Cash F=D+E 33,000