Use the following financial statements and additional information to prepare the

Question

Use the following financial statements and additional information to prepare the operating section of the statement of cash flows for the year ended December 31, 2012 using the indirect method. Derby Company Balance Sheets December 31 2012 2011 Change Assets: $ 85,600 65,200 20,400 56,750 16,100 157,750 144,850 12,900 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Equipment Accumulated depreciation-Equipment 72,850 6,080 12,680 (6,600) 280,600 245,600 35,000 (80.600) 97600) 17.000 $522,280 $427,480 94800 Total assets Liabilities: Accounts payable Income taxes payable Notes payable (long term) 52,850 45,450 7,400 3,000 59.200 79,200 (20,000) 15,240 12,240 Total liabilities $127,290 $136,890 Equity: Common stock Paid-in capital in excess of par Retained earnings 200,000 150,000 50,000 40,000 13,000 _141990 00590 41,400 53,000 $394,990 $290,590 Total equity Total liabilities and equity $522,280 $427480 94.800

Explanation / Answer

Derby Inc. Statement of Cash Flows – Indirect Method For the year ended Dec 31, 2012 Cash flows from operating activities Net income $83,400.00 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense $43,000.00 Gain on sale of plant assets -$4,700.00 Changes in current operating assets and liabilities Increase in accounts receivable -$16,100.00 Increase in inventory -$12,900.00 Decrease in prepaid expenses $6,600.00 Increase in accounts payable $7,400.00 Increase in income taxes payable $3,000.00 Net cash provided by operating activities $109,700.00 Cash flows from investing activities Cash received from sale of equipment $29,700.00 Cash paid for equipment -$120,000.00 Net cash used in investing activities -$90,300.00 Cash flows from financing activities Cash received from stock issuance $63,000.00 Cash paid to retire notes -$20,000.00 Cash paid for dividends -$42,000.00 Net cash used in financing activities $1,000.00 Net increase (decrease) in cash $20,400.00 Cash balance at prior year-end $65,200.00 Cash balance at current year-end $85,600.00 Accumulated Depreciation for sale of machine Beginning Bal. $97,600.00 Add: Depreciation during The year 43000 Less: ending bal. -80600 Depreciation for sale Machine $60,000.00 Cost of Machine Sold 85000 Less: Accumulated Dep. -60000 Book Value 25000 Add: Gain 4700 Selling cost 29700 Dividend Paid Beginning RE $100,590.00 Add: Net Income $83,400.00 Less: Ending RE -$141,990.00 Dividend Paid $42,000.00

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