The following information relates to Lowry Corporation for 2009 and 2010. USE IN

ID: 2500997 • Letter: T

Question

The following information relates to Lowry Corporation for 2009 and 2010.

USE INDIRECT METHOD!

Lowry Corporation

Comparative Balance Sheets

December 31, 2009 and 2010

Assets 2009 2010 Change

Cash $21,000 $54,000 $(33,000)

Accounts Receivable (net) $421,000 $480,000 $(59,000)

Inventory $310,000 $340,000 $(30,000)

Prepaid Expenses $17,000 $15,000 $2,000

Investments $80,000 $80,000 $0

Land $350,000 $300,000 $50,000

Building (net) $680,000 $700,000 $(20,000)

Equipment (net) $520,000 $340,000 $180,000

Total Assets $2,399,000 $2,309,000 $90,000

Liabilities

Accounts Payable $328,000 $335,000 $(7,000)

Accrued Liabilities $171,000 $170,000 $1,000

Income Taxes Payable $22,000 $34,000 $(12,000)

Bonds Payable $410,000 $700,000 $(290,000)

Long-Term Note Payable $130,000 $0 $130,000

Total Liabilities $1,061,000 $1,239,000 $(178,000)

Stockholders’ Equity

Common Stock $800,000 $600,000 $200,000

Paid-in Capital in excess of Par Value $152,000 $152,000 $0

Retained Earnings $386,000 $318,000 $68,000

Total Stockholders’ Equity $1,338,000 $1,070,000 $268,000

Total Liabilities and SE $2,399,000 $2,309,000 $90,000

Additional Information:

Net income for 2009 was $143,000.

Issued a long-term note payable in exchange for computer equipment for $130,000.

Purchased computer terminals for $90,000.

Depreciation on equipment for 2009 was $40,000.

Depreciation on building for 2009 was $20,000.

Reacquired bonds payable at par for $290,000.

Declared and paid dividends of $75,000.

Issued 20,000 shares of common stock at par value of $10 per share.

Paid $50,000 for land intended for a new plant site.

Prepare a statement of cash flows using the INDIRECT method. Include a schedule of noncash investing and financing transactions, if applicable.

Explanation / Answer

Solution :

Operating activities

Net income

143000

Add : depreciation

60000

Decrease in accounts receivable

59000

Decrease in inventory

30000

Increase in prepaid expense

-2000

Decrease in accounts payable

-7000

Incraese accrued liabilities

1000

Decrease in income tax payable

-12000

Cash flow from operating activities

272000

Investing activies

Purchased computer terminals

-90000

Land purchased

-50000

Cash flow from investing activities

-140000

Financing activities

Bonds

-290000

Dividnd paid

-75000

Common stock issued

200000

Cash flow from financing activities

-165000

Net cash generated

-33000

Add : opening cash balance

54000

Closing balance

21000