The balance sheets of Dolan Company, for December 31, 2014 and 2013, are as foll
ID: 2538215 • Letter: T
Question
The balance sheets of Dolan Company, for December 31, 2014 and 2013, are as follows:
2014
2013
Cash
$ 68,000
$ 42,500
Accounts receivable (net)
61,000
70,200
Inventories
121,000
105,000
Investments
.....
100,000
Equipment
515,000
425,000
Accumulated depreciation-equipment
(153,000)
(175,000)
$612,000
$567,700
Accounts payable
$ 59,750
$ 47,250
Bonds payable, due 2010
.....
75,000
Common stock, $20 par
375,000
325,000
Premium on common stock
50,000
25,000
Retained earnings
127,250
95,450
$612,000
$567,700
Additional information:
(a)
Net income, $71,800.
(b)
Depreciation reported on income statement, $38,000.
(c)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $150,000.
(d)
Bonds payable for $75,000 were retired by payment at their face amount.
(e)
2,500 shares of common stock were issued at $30 for cash.
(f)
Cash dividends declared and paid, $40,000.
(g)
Investments of $100,000 were sold for $125,000.
Required: Prepare a statement of cash flows using the indirect method.
2014
2013
Cash
$ 68,000
$ 42,500
Accounts receivable (net)
61,000
70,200
Inventories
121,000
105,000
Investments
.....
100,000
Equipment
515,000
425,000
Accumulated depreciation-equipment
(153,000)
(175,000)
$612,000
$567,700
Accounts payable
$ 59,750
$ 47,250
Bonds payable, due 2010
.....
75,000
Common stock, $20 par
375,000
325,000
Premium on common stock
50,000
25,000
Retained earnings
127,250
95,450
$612,000
$567,700
Explanation / Answer
Statement of Cash Flows For the Year Ended December 31, 2014 Cash Flows from Operating Activities: Net income 71800 Adjustments to reconcile net income to Net cash provided by operating activities Depreciation expense 38000 Gain on Sale of investments -25000 Decrease in Accounts receivable 9200 Increase in inventory -16000 Increase in accounts payable 12500 18700 Net cash provided by operating activities 90500 Cash Flows from Investing Activities: Purchase of Equipment -150000 Sale of Investments 125000 Net Cash used by Investing Activities -25000 Cash Flows from Financing Activities Payment of Cash Dividends -40000 Redemption of Bonds Payable -75000 Issuance of Capital Stock 75000 Net Cash Used by Financing Activities -40000 Net Increase in Cash 25500 Cash at Beginning of Period 42500 Cash at End of Period 68000
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